Traders eye Fed Minutes

Today's FOMC minutes are expected to provide crucial insights into the Federal Reserve's stance on future rate moves amidst mixed economic signals and persistent inflation concerns.

By Ahmed Azzam | @3zzamous | 22 May 2024

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  • Today's FOMC minutes are important for insights into the Fed's outlook.

  • Mixed signals include weak payrolls, rising unemployment, and stagnant retail sales.

  • High inflation in the US remains a significant risk.

  • UK inflation concerns grow with core CPI rising by 0.9% in April.

FOMC Minutes insight

Today's FOMC minutes are crucial for traders looking to understand the Federal Reserve's outlook. The minutes, which detail the Fed's meeting from three weeks ago, will be released amid a backdrop of mixed economic signals.

Recent data has shown weak payrolls, rising unemployment, stagnant retail sales, elevated unemployment claims, and declining inflation. These factors have fostered optimism that the Fed might act swiftly to support the economy.

However, the persistent high inflation in the US remains a significant risk. Today's minutes will offer insights into how committed the Fed is to reducing inflation to its target before easing monetary conditions.

UK inflation concerns grow

The latest UK inflation report has done little to support the notion of a potential rate cut from the Bank of England. While the headline inflation rate plummeted to 2.3%, the core inflation metric rose by 0.9% in April alone, bringing it to 3.9%. This stark contrast between the more favorable headline figure and the troubling core figure puts the spotlight on Bank of England Governor Andrew Bailey, who must determine which metric will steer monetary policy at Threadneedle Street.

A significant divergence has emerged between goods inflation and services inflation. Goods inflation has dropped to -0.8%, whereas services inflation has surged to 5.8%. This discrepancy highlights that the UK's inflation challenges are now primarily rooted in the services sector.