OPINION
Market Rating Before FOMC MeetingJan 31
Fed Minutes Will Reveal Members' Commitment to Monetary Tightening
As recession worries have become the main factor affecting the asset pricing in global markets, we are looking forward to the minutes of the June meeting of the Federal Open Committee (FOMC) to understand their commitment on monetary tightening. The FOMC raised its federal funds target to the range of 1.50 – 1.75 percent with a tightening of 75 basis points, the largest scale in 28 years, above the markets' expectation of a 50 basis point rate increase, at its meeting dated June 14 - 15.
In addition, in its Economic Projections Report, the gross domestic product (GDP) projection for 2022 was reduced from 2.8 percent to 1.7 percent. The Committee also changed its inflation expectation from 4.3 percent to 5.2 percent and funding rate forecast from 1.9 percent to 3.4 percent. However, at this point, the uncertainty brought by the Covid-19 cases in China, the Ukrainian War, Russia's possibility of implementing natural gas embargo on Europe, the fluctuations in the commodity market and the global tightening cycle led by the U.S. Federal Reserve raised concerns that the world economy could experience a recession.
Fed members, on the other hand, seemed determined at their last meeting to control inflation and inflation projections. As a matter of fact, the Economic Projections Report published by the Fed noted that interest rates will be at the level of 3.4 percent by the end of the year, pointing to a further tightening of 175 basis points, has an extremely big impact here. As it stands, discussions are growing about how much longer the Fed will continue its aggressive monetary tightening and whether it will take into account the risk of strangling the global economy. Proceeding from this, the minutes of the Committee's meeting, which are dated June 14 – 15, stand out.
In the minutes to be published at 20:00 (GMT+2) today, the answers of the Committee members, who revised the growth forecast for the world's largest economy downwards, to the question of ‘Has the possibility of a recession been ruled out?' will be seeked. In addition, in the event of increased recession risks, members' forecasts for the pace of interest rate hikes in order to try to stay in the average-2-percent-rate path aimed are highly likely to affect asset prices.
In addition, in its Economic Projections Report, the gross domestic product (GDP) projection for 2022 was reduced from 2.8 percent to 1.7 percent. The Committee also changed its inflation expectation from 4.3 percent to 5.2 percent and funding rate forecast from 1.9 percent to 3.4 percent. However, at this point, the uncertainty brought by the Covid-19 cases in China, the Ukrainian War, Russia's possibility of implementing natural gas embargo on Europe, the fluctuations in the commodity market and the global tightening cycle led by the U.S. Federal Reserve raised concerns that the world economy could experience a recession.
Fed members, on the other hand, seemed determined at their last meeting to control inflation and inflation projections. As a matter of fact, the Economic Projections Report published by the Fed noted that interest rates will be at the level of 3.4 percent by the end of the year, pointing to a further tightening of 175 basis points, has an extremely big impact here. As it stands, discussions are growing about how much longer the Fed will continue its aggressive monetary tightening and whether it will take into account the risk of strangling the global economy. Proceeding from this, the minutes of the Committee's meeting, which are dated June 14 – 15, stand out.
In the minutes to be published at 20:00 (GMT+2) today, the answers of the Committee members, who revised the growth forecast for the world's largest economy downwards, to the question of ‘Has the possibility of a recession been ruled out?' will be seeked. In addition, in the event of increased recession risks, members' forecasts for the pace of interest rate hikes in order to try to stay in the average-2-percent-rate path aimed are highly likely to affect asset prices.
