CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

US Federal Reserve addresses balance sheet and rate hikes in FOMC meeting

The Fed reveals why it was patient on interest rate hikes.

The US Federal Reserve just released minutes from its last Federal Open Market Committee (FOMC) meeting. The meeting reveals why the Fed was patient about rate hikes and how they will deal with its balance sheet.

Why is the Fed being patient about rate hikes?

The Federal Reserve chair, Jerome Powell, decided to pause a raise in interest rates last month. The decision was a reversal of its earlier move in raising rates in fall 2018. The rate hikes caused Wall Street volatility, which may have influenced its latest move. In its January meeting, the Fed detailed why it put a hold on the rate hikes.

'Participants pointed to a variety of considerations that supported a patient approach to monetary policy at this juncture as an appropriate step in managing various risks and uncertainties in the outlook,’ read the minutes.

‘A patient posture would allow time for a clearer picture of the international trade policy situation and the state of the global economy to emerge and, in particular, could allow policymakers to reach a firmer judgment about the extent and persistence of the economic slowdown in Europe and China,’ added the Fed.

While the Fed officials voted unanimously to put rates on hold because of volatility in the US economy, there was a division among the officials about how long to halt the rate hikes. Some want to pause rate hikes only when inflation was high, while others wanted to raise rates by the end of 2019.

What did the Fed say about its balance sheet?

The US central bank officials also discussed bond reduction on its balance sheet, according to the FOMC meeting minutes. ‘Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year. Such an announcement would provide more certainty about the process for completing the normalization of the size of the Federal Reserve's balance sheet,’ read the FOMC meeting minutes. Fed officials also discussed how important it was to be open in its balance sheet normalization.

‘Consistent with this principle, participants agreed that it was important to be flexible in managing the process of balance sheet normalization, and that it would be appropriate to adjust the details of balance sheet normalization plans in light of economic and financial developments if necessary to achieve the Committee’s macroeconomic objectives,’ noted the minutes.

The Federal Reserve’s latest meeting minutes show that while the Fed is independent of Wall Street, the US stock market and the economy weigh more on the Fed than previously thought.

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Be ready to act on ECB opportunities

Learn how the ECB’s monetary policy announcements affect interest rates and price stability ahead of its next meeting in 22 April 2021.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
  • Why is the Governing Council announcement important for traders?

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.