The highly anticipated FED minutes have been published. Here are the notable headlines:
- ‘Almost all’ officials were in favor of keeping interest rates constant at the June meeting.
- ‘Some’ officials supported the 25 basis point increase at the June meeting.
- ‘Some’ favored the increase, but agreed to pause.
- FED officials think that a moderate recession may start this year, as in the May minutes.
- All participants agreed that it would be appropriate to maintain a restrictive stance.
- At the 13-14 June meeting, almost all officials approved additional rate hikes in 2023.
- Some participants observed that resolving the debt limit issue removed a source of uncertainty.
- All members supported the continuation of the tight monetary policy.
- Supporters of rate hikes stated that there is ‘very tight labor market, stronger-than-expected economic momentum, little evidence that inflation is on its way to returning to the 2% target over time’.
- Members maintained their expectation of a mild recession towards the end of the year.
Following the publication of the minutes, Bitcoin reacted as follows:
What is the Importance of FED Minutes?
FED minutes, released a few weeks after each official FOMC meeting, are a closely watched indicator of how members felt about the state of the U.S. economy at the time.
The minutes can also be a roadmap for where officials see monetary policy heading. The June minutes are particularly interesting given that FED officials have since stated in their public statements that they are likely to make two more rate hikes this year.
FED decisions are often widely announced before official moves, and FED minutes are one of the tools officials use to get the message across. For example, at the June meeting, FOMC members chose to keep the benchmark interest rate unchanged, as expected, and kept the federal funds rate target between 5% and 5.25%.
However, Fed officials stated that not raising interest rates in June allowed the committee to evaluate the effects of tighter monetary policy on the US economy, while they stated that the pause is probably short-term and future increases may come soon after the July meeting.
Powell admitted last week that it was “surprising” that inflation was so persistent. “The bottom line is that the policy hasn’t been restrictive long enough,” he said.
*Not investment advice.