At the top of the Federal reserve will release the minutes of the last Fed meeting that took place on May 3rd and 4th. The Federal Reserve hiked rates by 50 basis points at that meeting. There was no central tendencies or dot plot released at that meeting.
The market will be focusing on the expectations for rates going forward. At the time the market was pricing in 50 basis points for the next 3 meetings, but those expectations have been eased a bit with today the potential for a 3rd hike of 50 BPS only about 30%.
Also of interest will be expectations for the terminal rate. That rate is now about 2.92% but was as much as 50 basis points higher before the recent move back to the downside.
The end of year and neutral rate is also of interest. Fed's Bullard is the most hawkish of Fed members. He is advocating for rates to move to 3.5% by the end of the year. Other Fed officials seem to be focused on getting to 2.5% by the end of the year. The neutral rate is generally thought to be around 2.5% (give or take).
Below is the full statement from that meeting.
Although overall economic activity edged down in the first quarter, household spending and business fixed investment remained strong. Job gains have been robust in recent months, and the unemployment rate has declined substantially. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.
The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain. The invasion and related events are creating additional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee decided to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities on June 1, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in conjunction with this statement.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Esther L. George; Patrick Harker; Loretta J. Mester; and Christopher J. Waller. Patrick Harker voted as an alternate member at this meeting.
