THE Fed minutes offers little explanation for the reduction in EI rates markets they slip into the red.
The Asian stocks they archived the session in red and dollar rose near three-week highs as traders shelved bets on a looming sharp rate cut this year.
Wall Street, closed a disappointing session overnight with all three major indices losing. The 30-share Dow fell nearly 300 points, or 0.8%, and the S&P 500 fell 0.8%. The tech-heavy Nasdaq Composite posted its fourth straight session in the red, losing more than 1%.
THE technological stocks Large-cap companies such as Apple have underperformed in early 2024 as overvaluations and uncertainty about when the Federal Reserve will begin cutting rates led investors to worry that markets had become too bullish. The Fed minutes indicated caution and less euphoria.
Fed minutes dampened market euphoria over rate cuts
According to the minutes of the meeting of the Federal Free Market Committee on 12-13 “participants believe that official rate is probably at or near its peak for this tightening cycle.”.
The minutes indicated growing optimism among participants about progressinflationnote “clear progress”. The committee has indicated its willingness to cut the benchmark interest rate in 2024 if the trend continues, although there is no indication that easing could begin as early as March, as futures traders expect. And this lack of detail has disappointed today’s markets.
“In the projections presented, nearly all participants said that as a result of the improvement in their inflation outlook, their baseline projections indicated that a lower target range for the federal funds rate would be appropriate through the end of 2024.”we read in the record.
Basically, this year will end and reducing the cost of moneybut how much and the timing remain uncertain, dampening investor enthusiasm.
According to CME’s FedWatch tool, markets are currently pricing in a 70% probability The Fed will cut rates in March compared to 90% the previous week.
Investors also slightly lowered their expectations for the year, with futures prices showing an expected easing of less than 150 basis points (bps) this year, compared with 160 bps last week.
But Goldman Sachs analysts still expect the first rate cut in March and five total cuts this year, commenting on the comments in the minutes as supportive.
Fed officials predicted in December a rate cut of 75 basis points in 2024pushes money market betting to about twice that amount and stimulates a the growth of stocks and bonds at the end of the year.
Richmond Federal Reserve President Thomas Barkin said Wednesday that the U.S. central bank does “making real progress” to contain inflation without causing serious damage to the labor market, with a soft landing expected “increasingly likely”.
The focus will now be on the highly anticipated US non-farm payrolls report due out on Friday, which will provide further clues about a labor market that is showing signs of easing.