Today was the realease of the Minutes of the Federal Open Market Committee for the meeting of December 13–14, 2022. And yet, regularly cited within financial news is a narrative that appears, nothing short of made up. Whatever the purpose, the net effect is the same: catching short-term investors or traders offsides, and whipping the news and other investors into a frenzy. The belief that somehow, in spite of everything the markets have ignored for the last year, and everything the FOMC has made emphatically clear, is somehow different this time with an easing of monetary policy right around the corner. Consider the following from today’s minutes release:
Participants reaffirmed their strong commitment to returning inflation to the Committee’s 2 percent objective. A number of participants emphasized that it would be important to clearly communicate that a slowing in the pace of rate increases was not an indication of any weakening of the Committee’s resolve to achieve its price-stability goal or a judgment that inflation was already on a persistent downward path. Participants noted that, because monetary policy worked importantly through financial markets, an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the Committee’s reaction function, would complicate the Committee’s effort to restore price stability. Several participants commented that the medians of participants’ assessments for the appropriate path of the federal funds rate in the Summary of Economic Projections, which tracked notably above market-based measures of policy rate expectations, underscored the Committee’s strong commitment to returning inflation to its 2 percent goal.
The concern over the risk:
…that an insufficiently restrictive monetary policy could cause inflation to remain above the Committee’s target for longer than anticipated, leading to unanchored inflation expectations and eroding the purchasing power of households, especially for those already facing difficulty making ends meet…
could not be more emphatically clear. See the full minutes here and search the word “appropriate” to move quickly through the document and get the drift of the committee’s sentiment.