Meeting Minutes Show FOMC is Eager to Catch Up in Inflation Fight

Fed minutes show central bank poised for 50bp hike, $95B/month balance sheet runoff. The price action headed into today’s FOMC minutes release had been hawkish to say the least, and the Fed’s minutes didn’t disappoint. An account of the meeting shows that officials are broadly supportive of a 50bp rate hike and aggressive action to catch up in the fight against inflation. The FOMC agreed on a monthly cap of ~$95B in balance sheet runoff, a significant increase over its last round of “QT”. Swap rates ended the day higher across a steepening curve, the 10-year Treasury yield climbing to 2.60% while the 2s10s spread continued to extend into positive territory after its brief inversion earlier this week.

Inflation looms as political risk in US and beyond. The US isn’t the only country where inflation has become politicized, in Peru protests have broken out over rising fuel prices and are threatening to dislodge President Pedro Castillo from power. Inflation is at multidecade highs in a number of countries- Australia, Germany, Italy, Pakistan and the UK all wrestling with price increases.

Day ahead. Fed speakers will include Bullard, Evans, Bostic and Williams. The market will get its weekly look at initial and continuing jobless claims while February’s consumer credit figures will also be released.