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Welcome to Wednesday’s trade! It was a big day on Wall Street, headlined by the latest FOMC Minutes release. Traders were on the edge of their seats waiting for any clue of what the Fed would do next. Did they get one? Let’s dig into September’s minutes and see if we can get a clue or two!
Any Fed news item is focused upon one thing: forward guidance. Today’s FOMC Minutes provided a bit of that, specifically when it came to the FOMC members’ “dot plot.” The dot plot indicates the range in which each member expects interest rates to reside at a given future point in time. It was released during the last Fed Announcements, signaling a majority of FOMC members favored two more rate cuts for this year. But, the FOMC was split 10-9 on these projections; a much leaner margin than once believed.
Here are a few of the key quotes from today’s FOMC Minutes:
On Policy: “Almost all participants noted that, with the reduction in the target range for the federal funds rate at this meeting, the Committee was well positioned to respond in a timely way to potential economic developments.”
On Rate Cuts: “Most participants [Committee members] judged that it likely would be appropriate to ease policy further over the remainder of the year.” On The Labor Market: “Some participants noted that, by several measures, financial conditions suggested that monetary policy may not be particularly restrictive, which they judged as warranting a cautious approach in the consideration of future policy changes.” One of the major omissions was any in-depth discussion of inflation. The FOMC members agreed that the “balance of risks” had shifted from inflation to economic growth; thus, further rate cuts were warranted. Also, inflationary pressures attributed to Trump’s tariff program were deemed temporary.
So, add it all up: more rate cuts are on the way, but they may not be as extensive as first thought. The markets took this news in stride, with US equities closing the day mixed, led by a 1% pop in the NASDAQ. The USD rallied by ¼%, placing modest bearish pressure on gold and crude oil. All in all, today’s minutes didn’t provide much in the way of clarity.
We’ll break down the FOMC Minutes to open tomorrow’s Switch Markets Live Webinar: Trading Bollinger Bands. Feel free to join us at 1:00 PM EST over at the Switch Markets YouTube channel. See you there!