Fed Minutes for January 2024:

A summary of the meeting indicated a general sense of confidence that the central bank's policy moves have succeeded in reducing the rate of inflation, which has reached its highest level in more than 40 years by mid-2022.

However, officials indicated they wanted to see more before starting to ease the policy, while saying fare hikes were over.

“Discussing the policy outlook, participants determined that the policy rate is at its peak for this tight cycle,” the minutes said. But “participants generally indicated that they do not expect it to be appropriate to lower the target range for the federal funds rate until they have more confidence that inflation is moving steadily toward 2 percent.”

Ahead of the meeting, a series of reports showed the central bank was moving toward its 2% target, with inflation still elevated. While the minutes assessed “solid progress,” the panel attributed some of that progress to “discrete” and unsustainable factors.

As a result, members said, they will “carefully assess” incoming data to determine where inflation is headed in the long run. Officials cited upside and downside risks and were concerned about cutting rates too quickly.

“Participants highlighted the uncertainty associated with how long the accommodative monetary policy stance should be maintained,” the summary said. “Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully evaluating incoming data in assessing whether inflation remains below 2 percent sustainably.”

Officials were “concerned that high inflation would continue to harm families, especially those with limited means to absorb higher prices,” the minutes said. “Although inflation data pointed to a significant pick-up in inflation in the second half of last year, participants were seen carefully assessing incoming data to see if inflation was moving steadily towards 2 percent.”

The minutes reflected an internal debate about how quickly the central bank wanted to move, given the uncertainty about the outlook.

A cautious approach emerged after the Jan. 30-31 meeting, as separate gauges of consumer and producer prices showed inflation running hotter than expected and still above the central bank's 2% 12-month target.

Several officials in recent weeks have hinted at a more patient approach to easing monetary policy. FOMC members were encouraged that a stable economy that grew at an annual pace of 2.5% in 2023 did not significantly impede growth in a succession of 11 interest rate hikes implemented in 2022 and 2023.

In contrast, the U.S. labor market continued to expand at a brisk pace, adding 353,000 nonfarm payroll positions in January. First quarter economic data points to 2.9% GDP growth so far Atlanta Fed.

Along with the debate on rates, members also brought up the bond holdings on the central bank's balance sheet. Beginning in June 2022, the Fed has allowed more than $1.3 trillion in Treasuries and mortgage-backed securities to be transferred instead of reinvested as usual.

The minutes indicate that a more in-depth discussion will take place at the March meeting. Policymakers signaled at the January meeting that they were likely to take a slow approach to a process nicknamed “quantitative tightening.” A pertinent question is how much excess reserves should be in place to meet the needs of banks. The central bank classifies the current situation as “high”.

“Some participants suggested that, given the uncertainty of adequate reserves, slowing the flow would help smooth the transition to balance or allow the group to continue the balance flow for a longer period of time,” the minutes said. . “Additionally, a few participants noted that the balance sheet process may continue for some time even after the Committee begins lowering the target range for the federal funds rate.”

Central bank officials consider current policy restrictive, so the big question will be how much to loosen to support growth and control inflation.

There are some concerns about growth continuing too rapidly.

The consumer price index rose 3.1% on a 12-month basis in January – 3.9% excluding food and energy, the largest decline in the month. The so-called sticky CPI, which measures volatility in housing and other prices, rose 4.6%, according to the Atlanta Fed. Producer prices rose 0.3% on a monthly basis, beating Wall Street expectations.

In a “60 Minutes” interview that aired a few days after the FOMC meeting, Chairman Jerome Powell said, “With the economy so strong, we feel we can carefully approach the question of when to start cutting interest rates,” he added. “Looking for

Markets had to revise expectations for a rate cut.

Where traders Futures market of fed funds Priced for a March cut, it was pushed to June. The expected number of cuts for the full year was reduced from six to four. In December, FOMC officials forecast three.

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