- The minutes of the Nov. 1 Fed meeting might look outdated and potential hawkish commentary may not affect markets, including bitcoin.
- Post-meeting weakness in U.S. economic data has convinced traders that the Fed’s rate-hike cycle has ended.
The minutes of the Federal Reserve’s November meeting, a closely watched record offering clues about the direction of monetary policy and its potential impact on the economy and markets, will be made public at 19:00 UTC (14:00 ET).
At the Nov. 1 meeting, the Fed kept the benchmark interest rate steady in the range of 5.25% to 5.5%, having last lifted it in July. During the post-meeting press conference, Chairman Jerome Powell said the persistent strength in the labor market and consumer spending may warrant more liquidity tightening, a bearish prospect for risk assets such as cryptocurrencies.
While the minutes due later today are likely to take a similar line, they may not elicit a reaction from financial markets. That’s because weak U.S. economic data released since the meeting have bolstered expectations the central bank is done raising rates. In other words, the November meeting minutes may simply be outdated.
Release of the minutes “is likely to be less market-moving than usual, given the post-meeting softness in data,” analysts at ING said in a Nov. 17 note to clients. “We have already heard from several Fed officials who have welcomed the direction of the numbers but commented that they want to see more of the same to be sure that inflation is on the path to 2%.”
The Labor Department’s employment report released Nov. 3 showed that job creation slowed to 150,000 jobs in October from 297,000 in September. The jobless rate rose to 3.9% while wage growth, measured by average hourly earnings, softened, signaling continued disinflation ahead. Data released last week showed the U.S. consumer price index grew a slower-than-expected 3.2% year-on-year in October, down from 3.7% in September.
Since then, according to Fed funds futures, traders have brought forward expectations of interest-rate cuts to May. Bitcoin is known to closely follow changes in fiat liquidity conditions.
Some observers, including Citi, agree the November meeting minutes are dated but say comments on the recent easing of financial conditions or availability of funding in the economy warrant attention. Tighter financial conditions affect households’ and firms’ saving and investment plans and weigh on economic growth and risk assets. Easy conditions have the opposite effect.
The recent easing in financial conditions runs counter to the Fed’s effort to contain inflation with tighter policy and may see the Fed add hawkish commentary to the minutes.
“Minutes from the November FOMC meeting may be most revealing regarding Fed officials’ attitude toward financial conditions,” Citi analysts wrote on Nov. 19. “In October, Chair Powell and his colleagues argued that higher 10-year Treasury yields would substitute for further policy rate hikes. But as financial conditions have loosened, the response has been asymmetric, with little push-back against lower rates and higher equity prices.”
“Minutes are compiled after the meeting, meaning officials might include some hawkish hints that conditions will need to remain tighter-for-longer to bring inflation lower,” the analysts added, while noting the market reaction may be limited.
Credit Agricole U.S. economist Nicholas Van Ness voiced a somewhat similar opinion.
“Given that financial conditions have eased somewhat following the meeting, this could mean some pushback from Fed speakers going forward against market pricing showing nearly 100bp of easing in 2024,” he wrote in a Nov. 17 note.
Bitcoin traded little changed around $37,300 at press time, according to CoinDesk data.
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