Decoding The Fed
We walk you through a What The Fed Said vs. What The Fed Meant exercise.
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Background
Our Federal Reserve analysis is brought to you by our guest author Yimin Xu. Yimin is a former pro rates trader, and knows his onions as a result. Anyone can be wrong but we’ve been delighted to host his work in our services for a couple years now and in our experience few can hold a candle to his analysis. Required reading.
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November FOMC Minutes
Remember the November FOMC? It was a game of two halves. Risk assets rallied on the dovish signals in the initial statement, as the Fed began to account for the total cumulative effects of monetary tightening. Unfortunately, the optimism lasted no more than half an hour as Powell took the stage to warn that the “ultimate level of rates will be higher than previously expected”.
This week, the Fed released its minutes for the November FOMC. In my view, it was a bag of mixed signals. I will explain why the Fed is doing it this way after making some observations.