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FOMC minutes in the microscope – UOB Group

FXStreet (Edinburgh) - Market analysts at UOB Group, assessed yesterday’s FOMC minutes, which derived in a sharp sell off in the USD.

Key Quotes

“Minutes from the 16-17 September FOMC meeting took a more dovish stance than the market was expecting, indicating that policymakers saw a global slowdown among the risks to the US economic outlook, with the rising dollar as a risk to exports and growth”.

“The minutes note that “Most participants anticipated that inflation would move gradually back toward its objective over the medium term”.

“However, views on the responsiveness of inflation to the level and change in resource utilization varied, with “a few” seeing labour markets as sufficiently tight that wages and prices would soon begin to move up noticeably but with “some others” suggesting that inflation was unlikely to approach 2% until the unemployment rate falls below its longer-run normal level”.

“Regarding the labour market, “many members” indicated that, although labour market conditions had generally continued to improve, there was still “significant slack”.

“That said, “a few” members expressed reservations about continuing to characterize the extent of underutilization of labour resources as significant”.

“It was noted that “the characterization of labor market underutilization might have to be changed if progress in the labor market continued.”

“Last but not least, we note that at least for some members there remains a degree of asymmetry with respect to sensitivity to upside and downside economic surprises”.

“According to the minutes, “some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the Committee’s goals”.

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