The minutes for the December FOMC of 2022.

This is the equivalent passage, which again plainly set out that the governors were in more hawkish mode than the market believed:

No participants anticipated that it would be appropriate to begin reducing the federal funds rate target in 2023…

A number of participants emphasized that it would be important to clearly communicate that a slowing in the pace of rate increases was not an indication of any weakening of the Committee’s resolve to achieve its price-stability goal or a judgment that inflation was already on a persistent downward path.

Participants noted that, because monetary policy worked importantly through financial markets, an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the Committee’s reaction function, would complicate the Committee’s effort to restore price stability.

In other words: “Don’t even think that we’ll start cutting this year, and if you guys persist in betting that we will, then it’s only going to be worse for all of us.” 

J Bloomberg

5 januari 2023

Fed Minutes Show Officials Feared Markets’ Rallies Could Hinder Inflation Fight

The Fed’s rapid rate increases last year have fanned investors’ hopes that inflation will slow quickly over the coming year. In the run-up to the December meeting, longer-term bond yields tumbled, reflecting both optimism about a speedy decline in inflation and fears of a recession this year.

But many Fed officials are anxious they won’t be able to defeat inflation unless they can slow the economy by tightening financial conditions, such as by raising borrowing costs or lowering stock prices.

WSJ 4 January 2023


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