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Fed: FOMC minutes confirmed Powell’s change of tone - Nordea Markets

Anders Svendsen, Research Analyst at Nordea Markets, explained that the minutes of the December FOMC meeting confirmed Chair Powell’s change of tone from last week to a more patient central bank. 

Key Quotes: 

“Minutes of the December FOMC confirmed data-dependence and patience and revealed that the Fed is getting closer to the end of the hiking cycle.”

“Incoming data was still considered strong at the December meeting and one ISM reading since then probably hasn’t changed that. However, financial conditions have continued tightening since the December meeting - although Powell’s changed tones last week have put risky assets back in fashion this week – and a substantial rebound in risky assets is likely required for a potential March hike to come back into play.”

“On the Fed getting closer to the end of the hiking cycle, the minutes explained the changes to the post-meeting statement like this: “The use of the word “judges” in the revised phrase was intended to better convey the data-dependency of the Committee’s decisions regarding the future stance of policy; the reference to “some” further gradual increases was viewed as helping indicate that, based on current information, the Committee judged that a relatively limited amount of additional tightening likely would be appropriate.”

“Market reactions have been muted following the release as the minutes confirmed the new tones from several FOMC members since the December meeting.”

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