Investors might have been hoping for much more clarity in the Fed regarding key changes to policy that may take place at the September 18 meeting
The Federal Reserve awakened the financial markets Wednesday by not what they did, but what they didn't do. The minutes from last month's U.S. Federal Reserve assembly gave few clues about whether an even more dovish change in its policy frame is possible in the fall.
The news came as a disappointment to a U.S. Dollar bears, setting off a chain-reaction from the financial markets, headed by a spike to the upside from the greenback. The spike in the dollar drove gold prices drastically reduced while inviting investors to also ditch the Euro and the high-flying Australian Dollar.
Key Issue: Average Inflation Target
Although most investors assumed the Fed minutes wouldn't reveal a lot of secrets about future Fed policy, speculation was rife the Fed will embrace an ordinary inflation target, and attempt to push inflation above 2% to make up for years it's run under, within a wider policy review, Reuters said.
But the moments were vague about the issue and only said,"some" of Fed members believed it would be very helpful to make a revised statement on its policy plan sooner or later, without providing details or timing.
The minutes also sounded fairly dismal about the U.S. market and doubtful about capping government bond yields as a means of encouraging investment and recovery -- resulting in a small sell-off at Treasuries.
Officials at the meeting"agreed that the ongoing public health catastrophe would weigh heavily on economic activity, employment, and inflation in the near term and was posing significant risks to the economic outlook over the medium term," the assembly summary said.
Because of how much impact the virus will likely have on the economy, FOMC members stated they expect to maintain the present overnight borrowing rate to a range of 0%-0.25% till they're"confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals."
New Worries About Threats to Financial System
Though Powell and other Fed officials repeatedly have said banks and related institutions are in generally strong shape, committee members at the meeting said they feared whether that might change if the virus spread stays and"more adverse" scenarios about the future take hold.
Officials Worried About Burgeoning Degrees of Public Debt
The national government has become $26.6 trillion in debt, gaining more than $3 trillion throughout the pandemic as Congress and the White House sped to get aid to people affected by the economic shutdown.
That has coincided with a rush to market of Treasurys and is raising concerns the high level of issuance"could have consequences for market operation."
Eventually...
The price action in the financial markets following the release of the minutes indicates investors might have been caught off-guard when the minutes showed little consensus by the FOMC to embrace an inflation-targeting regime, which is what so many could have been positioned for.
Additionally, investors might have been expecting for more clarity in the Fed regarding crucial changes to policy that may occur in the September 18 meeting.
For a look whatsoever of today's economic occasions, check out our economical calendar.
The news came as a disappointment to a U.S. Dollar bears, setting off a chain-reaction from the financial markets, headed by a spike to the upside from the greenback. The spike in the dollar drove gold prices drastically reduced while inviting investors to also ditch the Euro and the high-flying Australian Dollar.
Key Issue: Average Inflation Target
Although most investors assumed the Fed minutes wouldn't reveal a lot of secrets about future Fed policy, speculation was rife the Fed will embrace an ordinary inflation target, and attempt to push inflation above 2% to make up for years it's run under, within a wider policy review, Reuters said.
But the moments were vague about the issue and only said,"some" of Fed members believed it would be very helpful to make a revised statement on its policy plan sooner or later, without providing details or timing.
The minutes also sounded fairly dismal about the U.S. market and doubtful about capping government bond yields as a means of encouraging investment and recovery -- resulting in a small sell-off at Treasuries.
Officials at the meeting"agreed that the ongoing public health catastrophe would weigh heavily on economic activity, employment, and inflation in the near term and was posing significant risks to the economic outlook over the medium term," the assembly summary said.
Because of how much impact the virus will likely have on the economy, FOMC members stated they expect to maintain the present overnight borrowing rate to a range of 0%-0.25% till they're"confident that the economy had weathered recent events and was on track to achieve the Committee's maximum employment and price stability goals."
New Worries About Threats to Financial System
Though Powell and other Fed officials repeatedly have said banks and related institutions are in generally strong shape, committee members at the meeting said they feared whether that might change if the virus spread stays and"more adverse" scenarios about the future take hold.
Officials Worried About Burgeoning Degrees of Public Debt
The national government has become $26.6 trillion in debt, gaining more than $3 trillion throughout the pandemic as Congress and the White House sped to get aid to people affected by the economic shutdown.
That has coincided with a rush to market of Treasurys and is raising concerns the high level of issuance"could have consequences for market operation."
Eventually...
The price action in the financial markets following the release of the minutes indicates investors might have been caught off-guard when the minutes showed little consensus by the FOMC to embrace an inflation-targeting regime, which is what so many could have been positioned for.
Additionally, investors might have been expecting for more clarity in the Fed regarding crucial changes to policy that may occur in the September 18 meeting.
For a look whatsoever of today's economic occasions, check out our economical calendar.