What's FOMC Nov. meeting saying?

The minutes of the November 1 meeting of the Federal Reserve's Open Market Committee (FOMC) were released last night. "Multiple" Fed officials say the persistence of inflation means federal fundsThe end point of interest rates may have to be higher than they had expectedIn order to achieve the goal of reducing inflation. At the same time, they also said that as the policy interest rate enters the restricted area,It is appropriate to slow down the pace of raising interest rates.

Click to review the minutes.

According to the minutes of the meeting,

Most participants believe that it is appropriate to slow down the growth rate soon.

A slowdown in this context would better allow the Commission to assess progress towards achieving its goals of maximum employment and price stability.

However, it was generally agreed that it was important to consider factors such as lag,Some officials believe that the risk of excessive tightening increases.

A few (a few other) participants said a slower rate hike could reduce the risk of instability in the financial system. a few other participants said it would be better to wait until the policy stance is more clearly in the restrictive range and there are more concrete signs that inflationary pressures are subsiding significantly before slowing interest rate hikes.

The expectation of economic recession rises

As inflation remains high, the Fed continues to believe that inflation expectations have upward risks. However, in terms of real economic activity, the weak growth of real domestic expenditure in the private sector, the worsening global outlook and the tightening of financial environment are all regarded as significant risks to the expectation of real activity.

In addition, the possibility of sustained decline in inflation may require more tightening of financing environment conditions than expected, which is regarded as another downside risk. Therefore, the Fed continues to believe that the baseline expectation of real economic activity is at risk of being biased downward, and believes that the possibility of the economy falling into recession sometime next year is almost as high as the benchmark.

On the household sector discussion some economists say higher mortgage rates have significantly curbed housing activity.

Some households have already spent the extra savings they have accumulated during the pandemic, and there have been reports of an increase in the number of households facing financial stress.

With regard to the commercial sector,

Business investment is being dragged down by tighter financial conditions, with their business contacts finding it easier to plan production or reduce the need to maintain precautionary inventories as supply constraints ease.

As global inflation rises, many central banks tighten monetary policy at the same time, resulting in an overall tightening of global financial conditions.

On employment, the Fed believes that

The labour market remains very tight, unemployment is near historic lows, job vacancies are very high, redundancies are slow, employment growth is strong and nominal wage growth is high.

There is an increased risk that the cumulative limits of monetary policy exceed the level needed to reduce inflation to 2%. Some participants commented that continued rapid monetary tightening increased the risk of instability or chaos in the financial system.

Since this report is before the CPI data in October, it means that Fed participants are increasingly aware of the lagging impact of all interest rate hikes this year, which is a positive signal.

Overall, this is good for equities and fixed-income markets, as there has been a slight shift in consensus within the Fed, meaning the likelihood of a big rate hike is now less likely.

Partial dovish.