Fed Minutes Anchor Cautious Policy Approach As Risks Become More Two-Sided

• Federal Reserve officials, as per the minutes of their October-November meeting, agreed on a cautious approach to raising U.S. interest rates. They emphasized that further tightening of monetary policy would only be considered if incoming information indicated insufficient progress in lowering inflation.
• The minutes revealed that policymakers were grappling with conflicting economic signals. Despite robust U.S. economic growth, financial markets had driven interest rates higher, posing a potential threat to economic and job growth. The central theme was balancing the need to address inflation, which remained above the 2% target, with the potential negative impact of tightening credit conditions.
• The overall tone of the Federal Open Market Committee (FOMC) minutes was cautiously hawkish, indicating a commitment to a restrictive stance for "some time." This marked a shift in the Fed's policy dialogue, with a focus on the duration of maintaining the current policy rate rather than signalling immediate further rate hikes. Fed Chair Jerome Powell emphasized the importance of a careful approach and acknowledged the uncertainty in the path forward, keeping the door open for potential adjustments based on inflation trends.

 (Source: Reuters)