Federal Reserve Meeting Minutes Indicate Rising Interest Rates Ahead

Earlier today, the Federal Open Market Committee (FOMC) released the minutes from their January 31 and February 1, 2023 meeting.

Market participants that were hoping for a dovish Federal Reserve were disappointed to hear that a small number of FOMC officials were actually in favor of returning to 50 basis point rate hikes. While there are signs that inflation is slowing down, they are not sufficient to halt further interest rate hikes. This is especially true since the labor market remains tight, thus continuing to boost wages and, ultimately, prices.

Despite raising rates by 25 basis points, the FOMC expressed significant concerns about inflation remaining too high. Consequently, interest rates are likely to continue rising and remain high for a longer period than investors would prefer. It is particularly true since the latest inflation data came in higher than expected, indicating the challenge of curbing inflation. Furthermore, it's important to note that the meeting minutes were published before the latest inflation reports. Therefore, it remains to be seen if more FOMC members will support 0.5% rate hikes in the future.