NEW YORK (Reuters) - A "substantial majority" of policymakers at the Federal Reserve's meeting early this month agreed it would "likely soon be appropriate" to slow the pace of interest rate hikes as debate broadened over the implications of the U.S. central bank's rapid tightening of monetary policy, according to the minutes from the session.
MARKET REACTION:
STOCKS: U.S. stocks rose after the Fed minutes.BONDS: U.S. Treasury two-year, 10-year yields slipped.FOREX: The dollar extended losses versus the yen and euro.
COMMENTS:
RHYS WILLIAMS, CHIEF STRATEGIST, SPOUTING ROCK ASSET MANAGEMENT, BRYN MAWR, PENNSYLVANIA
"It's hard to say it was dovish but it was more like the statement they did and a lot less like (Powell's) press conference, when he got in touch with his inner Paul Volcker and went very macho. The minutes were more representative of what their statement was, which is we are still going to raise rates but we recognize monetary policy works with a lag and we have been pretty aggressive so we are going to raise rates slower so that is really why the market feels a bit of a sense of relief. Secondly, this is seasonally a great week for stocks so there was nothing in there that was going to upset anybody. It almost always goes higher Thanksgiving week, it is more that, I don't think there was anything revolutionary in these minutes. And clearly the economic data this morning was supportive of things are slowing but not falling off a cliff so that is probably a bit of a Goldilocks scenario that potentially gives the bulls an argument that maybe we can somehow engineer a soft landing."
JORDAN KAHN, CHIEF INVESTMENT OFFICER, ACM FUNDS, LOS ANGELES
"I didn't really think there was any surprises. They seem to still be pointing out that the risk to inflation are still high and recent data has been more persistent than they thought. People are going to get excited when they saw that some participants who were mentioning the need to slow the pace of rate hikes. But the market was already pricing in a 50-basis point rate hike for December and the odds in the Fed futures market of a 50-basis point hike was already 70% going into the minutes. The Fed has been hiking rates at 75-basis points and it was just unrealistic for them to continue at that pace."
KARL SCHAMOTTA, CHIEF MARKET STRATEGIST, CORPAY, TORONTO
"No surprises here. Fed officials are setting the stage for a more gradual pace of tightening in months ahead, and are expecting to raise rates beyond the levels contemplated in September. This aligns with post-meeting guidance from Chair Powell, and with commentary delivered by a number of policymakers over the last two months."
"It should be noted that a tail risk has been removed however - some were expecting a more formal articulation of the eventual peak in rates, but officials instead said there was 'considerable uncertainty' around where the terminal level would land, with 'incoming data' likely to dictate shifts in expectations. This has helped bring market-implied terminal rates back below the 5 percent mark, and is leading to broad-based weakness in the dollar."
BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN
"The path forward for monetary policy is a battle between the various and the several. It was only 'various' officials that thought they should revise higher their terminal rate projections while several thought plowing ahead raised the risks of financial instability. Chair Powell is clearly in the camp of the various, but he really oversold what sort of consensus there was for revising higher their peak rate guesses."
MOEZ KASSAM, PORTFOLIO MANAGER, ANSON FUNDS, TORONTO
"The Fed minutes confirm what we've suspected for some time. We're moving from a world of 75 basis-point rises to one of 50 and then soon no rises at all. The Fed has raised rates faster than in any period in recent history and now they want more time to judge the impacts of their actions."
"Investors need to read all the fine print and caveats in the Fed statements, and in the wider economic indicators. Even a 50 basis-point rise will raise the cost of capital throughout the economy, and non-monetary risks are also plentiful. Frankly, it is a little puzzling why the market has rallied so much."
"What I think you're seeing is renewed investor enthusiasm fueled by those who see that beautiful light at the end of what has been a very dark tunnel. And there has been so much money on the sidelines that is rushing back into the markets and waiting to get back into the action."
JEFFREY ROACH, CHIEF ECONOMIST, LPL FINANCIAL, CHARLOTTE, NORTH CAROLINA (VIA EMAIL)
"No surprises here: inflation is expected to cool next year and the Fed is set to slow down the pace of rate hikes."
"Bottom Line: Investors can reasonably assume that the Fed will hike rates by 50 basis points at the upcoming meeting. Recession looks more and more likely for the upcoming year and if the Fed responds accordingly, a recession may turn out to be short and shallow."
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
"No major surprise. The key point was the officials said the terminal rate is likely to be higher than previously expected, but the market already knows that. Ongoing rates are appropriate. The market knows that."
"There may be a little bit of a surprise that the majority supports slower rate hikes ahead...As you can see the markets have gained a little bit of upward momentum since the minutes were released."
MICHAEL JAMES, MANAGING DIRECTOR OF EQUITY TRADING, WEDBUSH SECURITIES, LOS ANGELES
"Multiple Fed governors indicated a slowing in the pace of rate hikes, which is pretty much exactly what equity markets needed to hear. They didn't say they're going to be pausing. Merely the fact that they're going to be slowing the pace confirms what the majority of people have been hoping to see. That's why you're seeing an equity spike initially. Obviously, we'll see where things go in the next two hours."
"What equity markets needed to see for the recent strength to continue was what we got from the minutes."