Wealth curve

Summary of the Federal Reserve’s January meeting: Almost al

The minutes of the Fed’s meeting on Wednesday showed that Fed officials expressed greater concern about the risks of US economic growth at the meeting last month, prompting them to signal a stop to raise interest rates.
According to the minutes of the meeting released on Wednesday, Fed officials also discussed plans to close bonds on the balance sheet by the end of 2019 at a meeting three weeks ago.
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 a statement will be the process of normalizing the size of the Fed’s balance sheet. Provide more certainty."
After the minutes of the meeting were announced, the stock market hit a high.
Market participants have been closely watching the Fed's intentions on its $3.8 trillion bond on its balance sheet. The Fed began to reduce the size of its portfolio from October 2017, allowing monthly capped funds to flow out. Officials tried to assure the market that the process should be carried out seamlessly.
However, investors began to worry that even if the financial environment tightens, the Fed will allow the contract to continue. The statement in the minutes of the meeting echoed the recent remarks made by several Fed officials that the plan may end before the end of the year as bank reserves fall to the level of reassurance of regulators and financial institutions.
On a related issue, the Fed also judged that it would be 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.”
Considerations include recent Weak inflation, government closures and fiscal policy paths. Officials also weighed the Fed’s tightening policy initiatives and the impact of ongoing trade negotiations on the economy.
The committee added that the federal funds rate is maintained at the target range of 2.25%-2.5% "there is almost no risk at present." In the past, officials had worried that keeping interest rates for a long time would stimulate inflation and force the Fed to tighten monetary policy at a rate that exceeded expectations.
However, 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.
Market pairThe response of the Fed’s actions seems to occupy a large part of the dialogue.
Participants pointed out that the market believes that the reduction of the balance sheet is one of the reasons for the market volatility in late 2018, and pointed out that investors interpret the information of the December meeting as “not fully aware of the tightening of the financial environment and since the fall The relevant downside risks to the US economic outlook since the beginning."