The Federal Reserve’s May 3-4 meeting minutes, where members voted unanimously to hike rates by 0.50%, are out!
Investors were reading today’s release closely, hoping to ease their concerns that the Federal Reserve is behind the curve on inflation and will be unable to orchestrate a “soft landing” for the economy. 👀
Federal Reserve members indicated that the job market remains strong despite economic activity slipping into negative territory during the first quarter. Meanwhile, they remain hyper-focused on bringing down inflation, which sits near 40-year highs.
The minutes reiterated the Fed’s 2% target and noted, “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.” 🌡️
The committee agrees that additional 50bp hikes are ahead for the next few meetings. However, the minutes also noted, “a restrictive stance of policy may well become appropriate depending on the evolving economic outlook and the risk to the outlook.”
These comments suggest the Fed may be willing to go further than the market expects if inflation remains elevated, but they will remain data-dependent.
Given much of what we saw today was in line with the market’s expectations, there wasn’t much volatility around the release.
Stocks closed toward the day’s highs, and bonds closed nearly flat. 📈
It’s always tricky to judge the market’s reaction to this type of news until we see how the rest of the week plays out. But it appears, *for now,* that investors’ are giving the Fed a thumbs up. 👍