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The market awaited the Fed's minutes

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Miguel A. Rodriguez
Miguel A. Rodriguez
05 November 2022
The minutes did not reveal any big surprises. Federal Reserve officials were determined to end inflation, which, as they pointed out, had worsened in recent months

However, they left open the possibility of raising interest rates between 50 and 75 bps at this meeting in July. The market had considered the possibility of a more aggressive rise of up to 100 bps, which was ruled out for the time being. Therefore, the tone is somewhat dovish.

 

They also pointed out to the concern that interest rate hikes could affect the growth of the economy that is already in a slowdown process, which shows that the Fed will also consider the negative effects of its monetary policy decisions on the economy.

 

Therefore, there is a high possibility that in the next meeting at the end of the month, they will decide to raise only 50 bps, especially if we consider the latest data from the US economy that have shown a certain slowdown, although still without showing signs of recession.

 

All this without ruling out the likely positive effect that the recent falls in all raw materials, including oil and natural gas, will have on the next US inflation figures.

 

So, the scenario is beginning to show some signs of stabilization, meaning more contained interest rates and a potential improvement in inflation due to the huge drop in fuel and other raw materials prices.

 

The ISM PMI Non-Manufacturing figure released yesterday was also positive, above expectations, and in the growth zone, showing that the services sector is still performing well despite all the previous months' headwinds.

Treasury bond yields rose during yesterday's session. Still, it was driven more by the good non-manufacturing PMI data than by the result of the Fed's minutes, which, as we have commented, were not particularly hawkish.

 

The stock markets received the news positively, both the Fed minutes and the PMI, with increases across the three main Wall Street indices.

The Nasdaq advanced more than 1% yesterday on its fourth day of gains and is slowly approaching the key level of 12,230. Above it should gain upward traction towards the 12,940 pivot zone, which is the one that would mark the change towards an uptrend.

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Sources: Bloomberg, Reuters

This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided. 

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Miguel A. Rodriguez
Miguel A. Rodriguez
Financial Writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.