FOMC minutes: ‘Many’ participants noted they would have preferred a 50 bps hike – Minutes

The Federal Reserve hiked rates by 25 basis points on March 16. The minutes will offer clues on how hotly they debated hiking by 50 basis points along with commentary on the balance sheet rundown.

• ‘Many’ participants noted they would have preferred a 50 bps hike
• Participants judged appropriate to move to neutral ‘expeditiously’
• Participants noted that — depending on developments — a move to tighter policy stance could be warranted
• Participants generally agreed to monthly caps of about $60B for Treasury securities and $35B for MBS
• Participants generally agreed that caps could be phased in over a period of three months or modestly longer
• All participants underscored the need to remain attentive to the risks of further inflation
• Participants generally agreed that after balance sheet runoff well underway, would be appropriate to consider sales of MBS
• Many noted that one or more 509 bps increases in the target range could be appropriate at future meetings, particularly if inflation

  Inflation
  

  Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
  

  Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
  Read this Term pressure s remained

• Participants agreed Fed was placed to begin balance sheet reduction as early as the May FOMC meeting
• Several participants judged that the upside risks to inflation from the war were more pronounced than downside growth risks
• Full text of the minutes