Wednesday’s biggest story for the financial markets is the disclosure of the minutes or notes presented by the Federal Open Market Committee (FOMC) for the meeting held on January 31 and February 1, 2023. Traders were looking for indicators of fear of over-tightening among FOMC members, as some investors continue to hope that the Federal Reserve cuts interest rates sometime this year.
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However, it may appear that these hopes will be dashed, as a few fed officials favored going back to 50 basis point rate hikes. Although there are signs that inflation is coming down, it’s not enough to prevent more interest rate hikes. They also talked about how the labor market remains tight, causing wages and prices to continue climbing.
Although the Fed ultimately raised rates by 25 basis points, they still expressed a lot of concern about inflation remaining a threat.
At the end of the day, interest rates will continue climbing, and they will remain elevated for longer than investors want. This is especially true since the most recent inflation data came in hot, demonstrating just how difficult it is to slow it down. It’s also worth noting that the meeting minutes are from before the latest inflation reports. Thus, it’ll be interesting to see if more members will want to return to 0.5% rate hikes going forward.
As a result, the ETFs that track the major indices — SPDR S&P 500 ETF Trust (SPY), SPDR Dow Jones Industrial Average ETF Trust (DIA), and Invesco QQQ Trust (QQQ) — cut their intraday gains following the release.
