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Fed members support slowing of rate hikes 'soon,' Fed Minutes show

Published 11/23/2022, 02:03 PM
Updated 11/23/2022, 02:08 PM
© Reuters

© Reuters

By Yasin Ebrahim

Investing.com – A majority of Federal Reserve policymakers were in support of slowing the pace of interest rate hikes "soon" to assess the lagged impact of monetary policy tightening on the economy and inflation. 

“A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the Fed's minutes showed. “The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important.”

At the conclusion of its previous meeting on Nov. 2, the Federal Open Market Committee raised its benchmark rate by 0.75 percentage points to a range of 3.75% to 4%. 

It was the fourth-straight 0.75 percentage point rate hike in as many meetings, but the Fed also laid out the carpet for slowing the pace of rate hikes at upcoming meetings, flagging several factors ---- including the cumulative tightening of monetary policy, the lagged impact of monetary policy on the economy and inflation – that would determine the size of future hikes.

In the wake of recent data pointing to slowing but still above-trend inflation, several members have continued to echo market expectations for less hawkish rate hikes. There were some Fed members, however, who preferred to hold of slowing hikes until  "the stance of policy was more clearly in restrictive territory and there were more concrete signs that inflation pressures were receding significantly," according to the statement.

About 80% of traders expect the Federal Reserve to slow the pace of rate hikes to 0.5% in December, according to Investing.com’s Fed Rate Monitor Tool.

With a slower pace of rate hikes largely priced in, investor attention has shifted to the terminal Fed Funds rate, or the level that rates will likely peak. The end game for rate hikes has also become an increasingly important factor for the Fed, though members acknowledged that while rates need to move higher than previously expected, there remains uncertainty around the terminal rate needed to achieve the central bank's objective.   

"Participants commented that there was significant uncertainty about the ultimate level of the federal funds rate needed to achieve the Committee's goals and that their assessment of that level would depend," the minutes showed. 

Traders are currently expecting rates to peak at 5.00% to 5.25%, though hawkish Fed members including St. Louis Fed President James Bullard recently suggested that rates may need to rise as high as 7% to bring down inflation. 

Yet, even if rates do peak around 5% that would still be the highest rates seen since June 2006, and may prove painful for risk assets, with growth sectors of the market including tech particularly vulnerable. 

“If they stop at 5% or 6% interest rates, that's pretty high, certainly compared with what we've seen over 10 to 20 years,” Managing Director of applied research at Qontigo Melissa Brown, told Investing.com's Yasin Ebrahim on Tuesday. For equities, the focus “will not be when they stop and stabilize, but really when they start to come down.”

Latest comments

the indicators show that inflation is peace so no reason to continue hiking
i dont see chairman powell in this article. same bs as taper.
The issue is if the high price which is already very high, especially food price, a lot of have been double comparing to the price of two years ago, be knock down to that of two years ago? Just to knock the inflation to 2% with a much higher base price comparing to two years ago is not enough, because people still suffer with current high price while people,s income did not go up much plus with very high interest rate which increase mortgage and credit card payment to a enormous high level as well as the rent which will never go down by itself unless we have a recession or deflation. I do not believe with rate of 6% or even 7% will ever bring down the inflation at all looking at the fact that in 1980 paul Walker needed to raise the rate to 20% to bring down the inflation with inflation over 10%. Why this time will be different with we have both demand and supply issuesz. The later the FED is really serious to knock down the inflation, the higher price people will pay
i don't think anyone is expecting inflation to go back to 2% anytime soon, but back to the historical average of 4 or 5% by end of 2023 is not unreasonable
Kathy Wood was rigth, when she said the Fed and Powell where wrong.
this is the same Cathie Wood who said the price of BitCoin will hit $1m?
looks like my analysis was correct ...look for that 4100 on the S& p500.... if we see 2 closes above approx 4125 then 4300 is possible before the end of the year .....and we will still be in a bear market.
Sooner then they expect, per the market pricing
Reminder:  In 1982, the market bottomed 2 months BEFORE Volcker said Fed "may shift tactics".
2022's low was reached 6 weeks ago.
first and last ....I think you're right ...the markets will signal when the FED is ready to alter course.. expect an attempted retest of that low. if that happens, volume will be the key.
"A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate,” the Fed's minutes showed. “The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important.” And it's  a  somewhat probable maybe that  "substantial"  "likely" and"soon" will actually be defined at point in the unspecified future....
It's as if the Fed members aren't confident they can predict the future!
Well, I was waiting for the apocalypse but it's doesn't come. Michael Burry what are your thoughts?
Look up his portfolio
LOLOLOLOOOOOOL Bears
I'll remember you when the rug pull happens
Same thing we heard last two weeks what difference
More certainty this week
The Feds say whatever keeps people calm. Name one thing that's legitimately come down in price and is taming inflation?
I've also said in past the the Fed just does what Congress mandates it to do.  Congress been using the Fed as a lightning rod to take blame away from itself, and most people whining about the Fed instead of Congress are falling for Congress' ploy.
they get the attention because the markets react so radically to abutting the FED says. It's purely cause and effect
  Or it's because the loudest, weakest market participants are more likely to fall for that ploy.
Markets have priced in a 7% rate already. Anything less then that and we hit an all time high by the end of December
"Traders are currently expecting rates to peak at 5.00% to 5.25%"  --  Someone is lying
7%?? I don't think so. You'll find out soon
extremely too optimistic:D
"FOMC Minutes Split Between Dovish (Slower Hikes) And Hawkish (Higher Terminal Rate) Views" Somebody's lying
Disagreement and uncertainty =/= lying
They're still going to raise rates!
We/Market know that.  This article says that.
we have a bear here. how was it today session??
👍
These guys still dont get it. Market is already pricing in higher coupons based on the data. Honestly I am not sure why they are needed at this point if they arent using models based on current events and not pointless historical data.
halarious.... To support the Committee’s decision to raise the target range for the federal funds rate, the Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 3.9 percent, effective November 3, 2022. The Board of Governors of the Federal Reserve System voted unanimously to approve a ¾ percentage point increase in the primary credit rate to 4 percent, effective November 3, 2022.4
Repetition is funny?
a bit late, market already pricing in rate cut and potential QE by the way it's been running. lol.
QE?? They have $6 trillion on their balance sheet to dump
sell the news
tell me about Euro and Gold
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