The U.S. credit risk indicators experienced their fastest drop since April 2020. BTC is advancing toward $82,000, and the SPX increased by over 7%, generating excitement among market participants. Recent articles have indicated that the Fed is expected to act cautiously. However, Trump’s responses have been more immediate than anticipated. What do the Fed minutes reveal?
Key Insights from Fed Minutes
The awaited Fed minutes have now been released, highlighting significant details:
- All participants in the Fed’s March 18-19 meeting deemed it appropriate to keep interest rates unchanged, given the rising economic uncertainties.
- Participants noted high uncertainty regarding the net effects of government policies on the economic outlook, advocating for a cautious approach.
- The majority highlighted the potential for inflationary effects stemming from various factors to be more persistent than previously expected.
- Almost all participants believe that inflation risks are tilted to the upside, while employment risks are skewed downward.
- Participants assessed that the FOMC is well-positioned to await greater clarity on the outlook.
- High uncertainty surrounding the net impacts of government policies justifies a cautious approach.
- Nearly all participants supported slowing the rate of balance sheet reduction, although some saw no compelling reason for this slowdown.
- Many emphasized that high inflation could prove more persistent than anticipated.
- Some observed that the FOMC might face difficult balancing acts if inflation remains persistent while growth and employment outlooks weaken.
- A few participants warned that a sudden repricing of risks in financial markets could amplify the impacts of any adverse economic shocks.
In a forthcoming early assessment regarding the Fed, we mentioned that “the Fed will monitor without immediate action.” Trump’s rapid U-turn regarding tariffs was also unexpected.
Additionally, when this meeting occurred, it was not yet known that tariffs would be so substantial. This context needs to be considered before evaluating the Fed’s current view. Based on futures pricing, investors believe the Fed will implement only three rate cuts starting in June this year.
