Senior Economist at UOB Group Alvin Liew reviews the recently published FOMC Minutes of the February 21-22 gathering.

Key Notes

“The key takeaways from the US Federal Reserve’s (Fed) 31 Jan/01 Feb 2023 FOMC meeting minutes were 1) Even though significant progress has been made to lower inflation, inflation remains well above the 2% objective, 2) More hikes are necessary to curb inflation and the restrictive stance maintained until the Fedis confident inflation is on a downward path, 3) While the vote to dial down to a smaller 25-bps hike in Feb was unanimous among FOMC voters, a few participants (non-voters) wanted a bigger 50-bps hike but not the majority, and 4) the minutes clearly showed the Fed remains more concerned about inflation over the economic outlook.”

“Fed Outlook – Dialed Down But Not Done Yet. The latest FOMC minutes strongly suggest that we are not quite near the end [of the tightening cycle], despite the improving inflation trajectory. As the Fed had retained its pledge that “ongoing increases” remaining appropriate but the minutes also showed that the view of downshifting to 25-bps hike is the majority of the FOMC policy makers, we continue to expect the Fed to hike for the next two meetings in clips of 25-bps hikes at the Mar and May 2023 FOMC meetings, bringing our terminal FFTR level to 5.25% (unchanged from previous). We continue to expect this terminal rate of 5.25% to last through 2023.”