Wealth curve

US stocks closed after the announcement of the minutes. The

US stocks closed slightly higher on Wednesday, and the Nasdaq recorded its eighth consecutive trading day. The minutes of the Fed meeting said that the sudden change in interest rate stance was due to concerns about increased economic risks, and central bank members hope to stop shrinking this year.
At 16:00 on February 20th (February 21st, Beijing time), the Dow rose 63.12 points, or 0.24%, to 25,954.44 points; the S&P 500 index rose 4.94 points, or 0.18%. At 2784.70 points, the Nasdaq rose 2.30 points, or 0.03%, to 7489.07 points.
What is the market driving force?
At 2 pm EST on Wednesday, the Federal Reserve announced the minutes of the Federal Open Market Committee (FOMC) monetary policy meeting on January 29-30.
The minutes of the meeting showed that Fed officials expressed serious concerns about the risks faced by the US economic growth, prompting them to signal that they would stop raising interest rates. At the meeting, Fed officials also discussed plans to end the reduction of the balance sheet size (the so-called contraction) by the end of 2019.
The minutes show that there is no consensus among Fed members on how to operate the interest rate policy: “Several Fed officials believe that if the inflation rate exceeds expectations, further interest rate hikes are needed; while other officials said that if economic development is in line with expectations, then Need to raise interest rates.
The disagreement among central bank members on future interest rate policies surprised some skeptical money market players because they had expected the Fed to have a more modest stance rather than claiming that there would be further interest rate hikes in 2019.
But Fed members have indeed reached a consensus on the issue of contraction, and almost all central bank members hope to stop their process of reducing the size of their balance sheets this year.
The minutes of the meeting showed that “almost all participants believe that it is advisable to announce plans to stop reducing the Fed’s assets later this year. Such announcements will complete the normalization of the Fed’s balance sheet size. The process provides more certainty."
Market participants have been closely watching the Fed's plan for $3.8 trillion in bonds on its balance sheet. The Federal Reserve began to reduce its asset portfolio from October 2017.
But investors are beginning to worry that even if the financial environment tightens, the Fed will continue to shrink. The statement in the minutes of the meeting echoed the recent remarks made by several Fed officials that as the bank’s reserves fellRegulators and financial institutions feel reassured that the plan may end before the end of the year.
The Fed also judged that it is prudent to adopt a "patience" attitude toward raising interest rates while continuing to weigh various factors that are not conducive to economic growth. The minutes of the meeting stated: “Participants pointed out that at this critical juncture, supporting various considerations of patience in monetary policy is an appropriate step in managing various risks and uncertainties in the outlook.”
Minutes of the meeting show that interest rate hikes Considerations include recent inflationary weaknesses, partial government shutdowns and fiscal policy paths. Officials also weighed the Fed’s tightening policy initiatives and the impact of ongoing trade negotiations on the economy.
The Fed left some room for manoeuvre for himself. Members of the Federal Open Market Committee pointed out that a reassessment of the “patience” approach would be necessary if potential adverse factors were alleviated.
At the January monetary policy meeting, the Fed chose not to raise interest rates, promised to be patient with future initiatives, and said it would pay attention to the development of the economic situation, suggesting that it may not raise interest rates further. At the Fed’s December meeting held six weeks ago, the Fed also hinted that it would raise interest rates further.
The market pays close attention to the minutes of the meeting. One of the main points of concern is to understand the reasons for the sudden change in the Fed’s position.
Investors are also concerned about the speech of Fed officials. New York Fed President John Williams (27.35, -0.07, -0.26%) said in an interview with Reuters that he is satisfied with the current interest rate level in the United States and believes that unless economic growth or inflation changes, it is not necessary Increase interest rates again.
Cleveland Federal Reserve Bank President Loretta Mestre said that if the economy grows at her expected healthy rate, interest rates this year may rise slightly.
The US government's debt ceiling issue is also attracting attention. In late February, the deadline for the US government debt ceiling is getting closer. Nordic United Bank and the well-known US financial website Money Morning warned earlier this month that if the US government debt ceiling cannot be extended before March 1, this may trigger a dollar crisis.