Fed wary of cutting US rates too quickly

FOMC meeting minutes suggest cautious approach to cuts until inflation battle is won.

22 February 2024

The latest Federal Reserve Open Market Committee (FOMC) meeting minutes was yet another eye-opener on the likely trajectory of rate cuts the markets have become perhaps a little over-excited about this year. The broad consensus from the committee was that the over-riding risk is of cutting too quickly (or at least cutting according to the markets’ assumptions), rather than too slowly.

It seems they are more comfortable being more restrictive for longer, on the basis that they are not overly convinced that the inflation battle has been decisively won. Although this is little different to what they keep telling everyone, the tone-deaf market drums will probably not like this reinforced messaging. Markets have had a strong start to the year and this complicates matters for them on the pace of cuts at least as financial conditions continue to get easier. As much as it is important to parse the language of the Federal Reserve, these meeting minutes are not that noteworthy – they keep re-iterating that it is too early to aggressively cut to an audience that has their fingers in their ears.