Fed Minutes Due Today, Here’s What the Market Expects

The US Federal Reserve is set to release minutes data from the October 31 – November 1 policy meeting on Tuesday. Analysts and investors largely expect the central bank to insist that the battle against inflation is not over yet, although the odds of further rate hikes are extremely low for the time being.

Fed Likely Done With Rate Hikes, But Won’t Officially Say It

Due to the Thanksgiving holiday, markets will obtain minutes data from the Federal Reserve’s latest meeting a day early this week. The data, set to be released later on Tuesday, is expected to offer further insights into what the Federal Open Market Committee (FOMC) prioritized after leaving interest rates unchanged earlier this month.

Additionally, the meeting minutes are expected to emphasize that policymakers don’t seem inclined to increase the benchmark rate further. However, they are avoiding explicitly stating this decision due to the inflation, which, despite the recent drop, remains above the central bank’s 2% target.

As such, analysts at Citi believe that minutes are likely to include the “superficially hawkish rhetoric” that rates may still increase. Still, “we continue to think that Fed officials are most likely done raising rates this cycle,” they wrote.

Citi’s expectations align with those of the majority of investors. Contracts tied to the benchmark overnight federal funds rate display a near-zero probability that the Fed would raise rates beyond the current 5.25%-5.50% range – the highest in more than 22 years. The CME Group’s FedWatch Tool puts the odds of a rate cut at around 60% for the Fed’s April 30-May 1, 2024 policy meeting.

But today’s minutes are unlikely to mention any plans for a dovish pivot, given the official’s recent statements that current policy rates may not be “sufficiently restrictive” to rein in inflation.

Stocks to Open Lower Ahead of Minutes Data

Ahead of the data, US stock indexes were on track for a lower open following an all-around positive session a day earlier.

In particular, the S&P 500 futures were down 0.25% at 4,536 at the time of writing, while the Dow Jones futures slipped 0.2% to 34,146, and those tied to the Nasdaq 100 fell 0.5% to 16,006. Meanwhile, the yield on the 10-year Treasury was 4.41%, and 20-year and 30-year yields slid to 4.75 and 4.57, respectively.

Yields have been on a downtrend since last month amid cooler-than-expected economic data.

When do you expect the Federal Reserve to begin cutting interest rates? Let us know in the comments below.

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