What we learned from the Fed Minutes
Ahead of the FOMC minutes we warned that there were two distinct things underway: The global economy slowing and the US economy holding up relatively well.
The problem is that this creates mixed messages. The dollar rose on the positive domestic take but ignored the international outlook, at least for now.
Capital Economics looks at the highlights, noting that the decision to move to the sidelines was more about the international outlook than the domestic one:
The bar to restarting rate hikes in the near-term seems to be quite high, with several participants arguing that rate increases would be necessary "only if inflation outcomes were higher than in [the] baseline outlook". The upshot is we now expect the Fed to leave rates unchanged throughout this year, before a further deterioration in economic growth forces it to cut rates by a total of 75bp in 2020.
The US dollar slumped after the Minutes on a hawkish (or at least upbeat take) but stock markets initially fell then recovered. We'll see which side wins out tomorrow.
