FX.co ★ Federal Reserve minutes may show mixed views

Federal Reserve officials have a wide range of opinions on what to do about inflation, which continues to rise rapidly. Cleveland Fed President Loretta Mester told CNBC that the pace of rate hikes could be slowed, but inflation data are not yet conclusive enough to abandon hikes altogether.

San Francisco Fed President Mary Daly is of the same opinion. She said in a separate speech on Monday that inflation remains too high and policymakers still have a long way to go before completing their tightening campaign. But both Federal Reserve presidents have reinforced their expectations that the central bank will slow down its pace of interest rate hikes next month, even as they stressed the need to continue tightening aggressive monetary policy.

According to Bloomberg News, several Fed officials have indicated they may consider a 50 basis point hike at their next meeting in mid-December, with the final decision depending on what happens to the economy.

However, some Federal Reserve officials remain very aggressive, such as St. Louis Fed President James Bullard, who recently said that the Federal Reserve may need to raise interest rates to 7% to put more pressure on inflation. Another hawkish Fed member, Minneapolis Fed President Neel Kashkari, said the Fed should keep raising interest rates until it is sure inflation has stopped rising.

According to the CME FedWatch tool, there is a 75.8% chance that the Fed will initiate a rate hike of just 50 basis points in December, breaking the rate hike cycle by 75 basis points, as it has done during the last four consecutive FOMC meetings. The probability of a 50 basis point rate hike in December is slightly lower than the probability estimated 24 hours ago of 80.6%.

The Federal Reserve will release the minutes of the November FOMC meeting today, one day before Thanksgiving in the US and Canada. Due to the shortened trading schedule over the holidays, we can expect lower volume than usual, which could increase volatility, as was the case last holiday weekend.