FOMC MARCH MEETING MINUTES:
- The FOMC[1] readout of its last meeting shows policymakers are growing increasingly worried about the inflation outlook and are leaning towards more aggressive interest rate hikes
- The document also presents clear guidelines how the central bank may proceed with quantitative tightening
- U.S. stocks maintain losses after the hawkish minutes cross the wires
Most Read: Rising Rates and Volatility are Features, Not Bugs[2]
The Nasdaq[3] 100 maintained sharp daily losses after the Fed released the minutes from its March gathering, when policymakers began the interest rate liftoff and announced progress on a plan to reduce its securities holdings, which ballooned to nearly $9 billion during the pandemic.
According to the account of the two-day session, policymakers are increasingly concerned about inflation and are beginning to favor stronger and more forceful measures to counter soaringconsumer prices. In fact, many members indicated one or more 50 basis points rate increases could be appropriate in the future to restore price stability. This sentiment to go “go big” basically seals the case for a half a percentage adjustment at the May conclave.
The readout of the last meeting also offered valuable insight into the ongoing deliberations to begin decreasing the size of the balance sheet - a process known as quantitative tightening (QT). The record revealed that all participants agreed that asset reductions could commence at a coming meeting and that the scheme would need to be executed at a faster pace than the previous wind-down to take into account different economic and financial conditions.
On the balance sheet normalization mechanics, policymakers noted that QT will be carried out primarily by decreasing reinvestments of the principal payments received from maturing securities held in SOMA. However, many participants indicated that direct sales
