NEW YORK (Reuters) - Several Federal Reserve officials at the U.S. central bank's policy meeting last month considered pausing interest rate increases until it was clear the failure of two regional banks would not cause wider financial stress, but even they ultimately concluded high inflation remained the priority.
However, those officials, along with others, agreed that actions taken by U.S. policymakers and the Fed had "helped calm conditions in the banking sector and lessen the near-term risks to economic activity and inflation," according to the minutes Federal Open Market Committee's March 21-22 meeting released on Wednesday. They supported a quarter-percentage-point rate increase despite the new uncertainty around the financial sector. STORY:
MARKET REACTION:
STOCKS: S&P 500 reversed slight gain and was off 6.36 points, or 0.15% BONDS: The U.S. Treasury 10-year yield slipped and was last at 3.434%. The yield on the 2-year note slipped to 3.966% FOREX: The dollar index was little changed, down 0.617%
COMMENTS:
KEN POLCARI, MANAGING PARTNER, KACE CAPITAL ADVISORS, BOCA RATON, FLORIDA
“That is exactly what we knew, we knew as soon as the banking crisis hit that 50 (basis point hike) was off the table. I didn’t see anything new that was so significant in this FOMC report that is going to change my mind about anything. They are going 25 and then they are going to pause. And I don’t think they are going to be any rate cuts (this year), I don’t care what fed funds futures say. I don’t see how the Fed could possibly cut when inflation is still, at the very least, 3% above where their target is, so I just don’t see how they could possibly justify that they have to cut rates because things are so bad. It’s going to have bad, like really bad, for them to cut. I’m not swayed by the latest FOMC minutes at all.”
SAM BURNS, CHIEF STRATEGIST, MILL STREET RESEARCH, SHERBORN, MASSACHUSETTS
"The minutes sound a little bit more on the dovish side. It seems to indicate they're more inclined to pause sooner than before. I would guess at this point that the two options are 25 basis points in May or none. The inflation data plus banking industry issues probably take 50 bps off the table completely."
"The headline inflation rate is below the core rate which it hasn't been for a long time. But the inflation story is still moving in the right direction... still, the Fed will be worried about their messaging as the headline number is still high."
"There hasn't been much of a reaction from the bond or stock market. CPI data was relatively benign, the minutes are being viewed as relatively benign. It's probably going to be range-bound trading for a little longer until we get some major news."