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FOMC Supports Slowdown in rate Hike, Dollar Collapses

by Didimax Team

FOMC minutes for the Fed's November meeting released in the early hours of this morning show a dovish outlook. This news inevitably suppressed the movement of the Dollar Index or DXY to the level of 105.60. 

In yesterday Asian session (24/November), the price is still under pressure in the range of 105.73. After a series of aggressive rate hikes in recent months, the US inflation rate began to flatten in October. 

In addition, some FOMC members are concerned about the . posed by monetary tightening. It seems that they need to do several actions to handle the situation. 

Those reasons prompted a majority of Fed policymakers to approve the prospect of a slowdown in the rate hike at its next meeting. This thing for sure bringing an effect in the market. 


Slowdown Step is a Good Option for FOMC

A slower move is a better option for the committee (FOMC) to conduct an assessment of progress. It is especially towards maximum employment targets and price stability.

The uncertain magnitude of the impact of monetary policy action on the economy and inflation is one of the main reasons. It was said by the FOMC minutes. 

According to the report, more important than the size of the rate hike at the next meeting is how far interest rates can be raised. So, inflation can fall sustainably towards the central bank's target.

To that end, the Fed will adjust the pace of tightening cautiously in the coming months. How far interest rates can be raised will largely depend on the movement of inflation in the next few months. 

Fed Officials Have Not Yet Compacted

In this case, the central bank will monitor whether last month's decline in inflation could be a sustainable trend.  The release of the FOMC minutes this time shows a certain condition. 

It is actually the emergence of debate among the Fed's top brass over the steps that need to be taken. Some members said rapid policy tightening could have an impact on the economy and financial stability. 

However, other members argued that any attempt at a slowdown would have to wait for concrete evidence of a reduction in inflation. This data is essential for all market participants.

The way forward for the Fed's monetary policy is a matter of 'various' and 'some'. It means that only 'various' officials think they should revise the terminal's interest rate target higher.

Meanwhile, 'some' opinions going forward actually increase financial uncertainty. It  is concluded Brian Jacobsen, investment strategist at Allspring Global Investments in Wisconsin.

Loretta Said Inflation was Too High

Before, the Cleveland Fed President, Loretta Mester, told CNBC that inflation is still too high. That is why; monetary tightening could only be stopped if central bank seen a further decline for the rate. 

However, he thinks the scale of the next rate hike needs to be reduced. That is as economic conditions have begun to be restrictive as people can see recently.

The Mester's opinion is in line with Fed Chairman Jerome Powell's remarks earlier this month. Powell at the time said that while interest rates need to rise even higher.

The aim is to achieve their inflation target, the central bank needs to raise rates on a smaller scale in the future. The statements influenced market anticipation ahead of the minutes release. 

Aggressive hawkish May not be Seen Anymore 

Markets now believe the minutes will contain info about a slowdown in the "Fed rate hike" rate, instead of the aggressive hawkish stance it once was. 

The anticipation was one of the factors that silenced the USD yesterday morning. Carol Kong of the Commonwealth Bank of Australia also revealed that there was also an improvement in risk sentiment.

It is especially the one which triggered a rally in stocks and bonds. People should thanks to better corporate financial reports. 



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