Key points from the FOMC Minutes: participants growing increasingly bearish – stark contradiction from all these bullish headlines

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by Player896

FOMC link here

  • The Fed is increasingly concerned about global recession risks spilling over into a US economy that is already on a downward trajectory.
  • The probability the US enters a recession next year is the same as the probability for their base case. Risks to the economy are skewed to the downside and risks to inflation are skewed to the upside.
  • The odds of something else breaking (like UK pensions) continues to rise and is beginning to be a concern.
  • While rates will likely begin slowing down to 50bps in December, it is not guaranteed. In addition, the terminal rate needed to properly address inflation will likely need move higher.
  • US economic activity projections have been moved lower from September’s estimates. US output will likely move below potential in 2024 and 2025. The unemployment rate will likely be above its natural rate in 2024 and 2025.
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All in all, the odds of a recession continue to rise (by some metrics it is pretty much guaranteed) and the slowing rate hikes are offset by the need for more rate hikes. Economic projections for 2024/2025 have been lowered and fears of something else breaking is now a notable concern.

That sound positive to you?

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