Sept FOMC showed agreement on higher rates for longer

NEW YORK, Oct 12 (Reuters) – Federal Reserve policymakers have agreed that they need to move to a more restrictive policy stance — and then maintain it for some time — to meet the Federal Reserve’s goal of having the lower inflation, an indication of last month’s two-day meeting showed on Wednesday.

Minutes from the Sept. 20-21 meeting showed that many Fed officials “emphasized that the cost of doing too little to lower inflation is likely to outweigh the cost of doing too much.”

Many officials said they had upgraded their assessments of the path of rate hikes likely to be needed to meet the committee’s targets.

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HISTORY: read more

MARKET REACTION:

EQUITIES: S&P 500 (.SPX) extended a modest gain, up 0.15% to 3,594.34 BONDS: US 10-year Treasuries last eased in price on 11/32. to 3.8962%, down from 3.939% late Thursday. FOREX: The Dollar Index fell 0.141%

COMMENTS:

JUAN PEREZ, DIRECTOR OF TRADE, MONEX USA, WASHINGTON

“It’s clear that they (the Fed) will keep raising interest rates because they seem to feel that if they don’t, inflation could get really out of hand. So if you basically look at the log, there really isn’t much of a surprise. Ultimately, they think you have to hit some very high interest rates to really cool the economy down. Unfortunately, in theory, that will be very, very positive for the dollar.”

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“Until now it’s been kind of a dollar negative. Maybe there’s a bit of hope in the minutes that officials are basically weighing the risk of hiking too hard or too high, but that’s not the biggest concern right now. Inflation remains the number one concern. And as long as the United States and the Federal Reserve are willing to fight it, it will be good for the dollar.”

GEORGE BALL, CHAIRMAN, SANDERS MORRIS HARRIS, HOUSTON (via email)

“Wednesday’s minutes report confirms the Fed’s commitment to fighting inflation. The Fed must continue to discuss and implement further rate hikes or everything it has done to fight inflation so far is wasted baggage. While inflation has peaked, the Road to a 2% inflation rate will be long, windy and bumpy.”

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“The Federal Reserve’s current tone suggests it is committed to raising interest rates until the inflation snake is dead.”

“We believe market sentiment will remain negative through mid-November, at which point Federal Reserve officials are likely to start signaling that a pause in rate hikes is on the horizon sometime in early 2023. That will be the tipping point where stocks will start going up again.”

“While this Fed pivot could mean the economy is in recession, markets are looking about 6 months ahead and the belief that there will be no more rate hikes after early 2023 will psychologically return the rise of the bull .”

CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC

“For the most part, there is nothing earth-shattering in the Fed minutes. The fact that they say there is a greater risk of doing too little than doing too much perhaps reinforces the notion that they are more likely to continue raising rates at a rapid pace.”

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“Some members talked about calibrating their response. That could mean that the Fed is aware that raising rates too quickly could cause major economic damage. They’ve talked about how they’re willing to risk a recession to get inflation under control, but it’s possible that as the risks of a recession increase, they may lose their nerve a little.”

“The market is eyeing the CPI release tomorrow. There are still some bulls out there hoping that slowing inflation will give the Fed a reason to slow rate hikes or possibly pause them.”

“The bulls are hoping inflation will cool faster than expected and the Fed won’t hike as high as some fear. The bears believe that the Fed will continue to hike, raise interest rates to fairly high levels and keep them there for an extended period of time, causing a recession, possibly a bad one.”

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Compiled by the Global Finance & Markets Breaking News Team

Our standards: The Thomson Reuters Trust Principles.

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