FOMC Meeting Minutes Show Support for January Rate Pause and Consideration for Cuts

Summary

The January Fed meeting minutes revealed that while almost all officials supported pausing rate actions, there was significant internal division on the future path of interest rates.USHK News+ 2 Some members indicated that rate cuts could be appropriate later in the year if inflation declines as expected.USHK News However, a more dominant theme was caution, with several officials expressing concern about persistent inflation risks and warning that further rate hikes might be necessary if inflation remains high.Zhitong+ 3 The committee decided to hold the federal funds rate at 3.5%-3.75%, marking a “hawkish pause” after three consecutive cuts.QQ News The market has subsequently pushed back expectations for rate cuts.Sina Finance+ 2

Impact Analysis

So the minutes basically kill the dovish pivot narrative. They want you to focus on the ‘several officials’ talking about future cuts if inflation behaves USHK News, but the real story is the hawkish tilt and the fact that some members are even whispering about hikes again Zhitong+ 2. This isn’t a simple pause; it’s a ‘hawkish pause’ where the bar for easing has been set much higher . They’ve also upgraded their economic assessment and deleted language about employment risks, reinforcing their comfort with staying tight QQ News.

Bottom line: The market’s pricing for a June cut looks very optimistic now Sina Finance. The committee is clearly divided, but the center of gravity has shifted to fighting inflation at all costs. This reinforces a ‘higher for longer’ reality. This is a green light for the US Dollar and a continued headwind for long-duration assets. I’d maintain a cautious stance on equities and expect further upward pressure on bond yields.