Having been abused by President Trump and seen bonds and stocks rally, the dollar round-trip to unch, and the yield curve crash, today’s FOMC Minutes were not expected to be big market movers, but more reassurance that investors should ignore the collapsing yield curve and President Trump.
The Minutes focused instead on the balance of risks in the market:
- *FED SAW TRADE, HOUSING, EMERGING MARKETS AS DOWNSIDE RISKS
- *FED: SOME SAW FISCAL AS UPSIDE RISK, A FEW AS FUTURE DOWNSIDE
But seems set on hiking rates no matter what:
Many Fed Officials Saw Another Hike Likely Appropriate ‘Soon’
And raised concerns about the collapsing yield curve:
*FED OFFICIALS DISCUSSED IMPLICATION OF YIELD-CURVE FLATTENING
* * *
Nothingburger for the dollar since The August Fed statement but bonds and stocks have ripped…
Furthermore, since the August 1st FOMC statement, the US yield curve has crashed back to 11 year lows at just 21bps…
The market remains far distant from the reality that The Fed perceives in rates – in fact pricing in rate cuts in 2020, as opposed to rate-hikes as per The Fed…
Bloomberg additionally notes that The Fed has been nudging inflation-adjusted rates closer to neutral…
Finally we note that today’s FOMC meeting Minutes will have a short shelf life, as market participants will quickly refocus on the Fed’s Jackson Hole conference later in the week.
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