The Nordea Markets analysts offer their afterthoughts on the US Federal Reserve (Fed) Oct meeting minutes released on Wednesday.
Key Quotes:
“The FOMC minutes revealed that the Fed is done for now. The Committee is still split and acknowledges persisting uncertainties.
Recent money market volatility was a big theme in the minutes, and while everybody agreed that the plan to purchase Treasury bills should not be confused with another round of QE, there were some disagreements over the appropriate level of bank reserves, the pace of T-bill purchases and how to best provide liquidity in the future (ie frequent repo operations vs. a standing repo facility).
Tonight’s minutes do not change our view on the Fed. We think the Fed will cut again in March, thereby totalling four cuts in this so-called mid-cycle.
Thus, growth momentum remains weak and we expect a further slowdown with weaker ISM prints and payrolls, prompting the Fed to reassess its “moderate growth outlook”.
On top of that, inflation expectations are still close to historical lows while we also see a clear risk of a correction in the equity and credit markets.”
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