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According to analysts at Nordea Markets, the latest FOMC minutes signaled that the Fed is on hold for now and that a rate cut would require a material change of the growth outlook.

Key Quotes

“Minutes reiterated the message from both the FOMC meeting and several Fed speeches over the past months that the Committee is on hold for now. Thus, the Fed thinks it has done enough to avoid a downturn and will instead monitor the lagging effects on easier monetary policy on incoming data. Therefore, the dot plot median also signaled no rate changes in 2020.”

“Still, the FOMC sees the risk to the downside. This is primarily related to “global developments and international trade” (i.e. the trade war), while the inflation outlook constitutes another risk factor with “various participants being concerned of longer-term inflation expectations being too low”

“Overall, however, little news on the monetary policy outlook was offered today. The Fed still needs to see the growth outlook “materially change” before potentially adjusting policy. Given the limited news, today’s minutes do in turn not change our view on the Fed. We have penciled in a rate cut in March, as we expect growth to slow below potential and the labour market to soon show weakness.”