The FOMC Meeting minutes, usually released 3 weeks after the Fed's last interest rate decision's, provides insights on the Fed's potential policy course by analyzing the tone of the outlook as well as the vote split. A bullish tone reflects optimism, thus boosting the greenback against other countries, and vice versa.
The meeting was held yesterday, with the minutes revealing that the committee acknowledged the ongoing risks and uncertainties to the current economic outlook, particularly regarding the pace of the economic recovery. It also showed that almost all voters opted for a rate pause in June, but two more rate hikes of 25 percentage points are likely to happen this year. The Fed Funds rate is expected to reach 5.6% by the end of Q4 this year since the inflation rate of 4% is still way above the Fed's target. Besides monetary tightening, the committee also highlighted the importance of fiscal support in the current challenging times.
The term 'recession' is still on the table. Desk survey respondents believe that an economic decline is probable in the short term as a result of the tight bank credit conditions and financial environment. But the exact timing is still uncertain as the economic indicators show an ongoing strength of economic activity. Real GDP is expected to slow during Q2 and Q3 of 2023 before "declining modestly" during Q4 into Q1 of 2024.
With relatively better economic indicators and government support, investors are betting for this year to be the final bump in the road of economic recovery for the US and the global economy. However, economic uncertainty is high, so investment decisions should be taken considerably while closely watching the markets and economic news.
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