The Federal Reserve’s Federal Open Market Committee released the minutes from its Jan. 25-26 meeting today. The central bank largely focused on inflation, hinting at a timeline for planned interest rate hikes. Why does this matter? The FOMC meeting minutes have broad implications for the stock market — and your portfolio.
So what do you need to know about the latest FOMC meeting?
Unsurprisingly, the January meeting saw officials highlight inflation concerns. With this in mind, many investors believe the FOMC minutes hint at a rate hike in March 2022. The Federal Reserve believes a series of interest rate hikes throughout the year will be necessary to combat inflation.
Additionally, it appears the FOMC is starting to think about stopping its asset purchases and trimming down the balance sheet. In the meantime though, the Fed will be purchasing more Treasury bonds and mortgage-backed securities.
What Do the FOMC Minutes Mean for Stocks?
The release of the FOMC meeting minutes today largely eased market concerns… at least for now. Major indices started to trim their losses in the afternoon, with the S&P 500 closing up slightly. Leading cryptocurrency prices also started to recover. 10-year Treasury yields, which were rising to the start the day, also cooled down.
Why? According to Yahoo Finance, one source of relief is that the minutes did not mention the Fed increasing interest rates by 50 basis points in March. While the central bank has not ruled it out, the lack of explicit mention is smoothing market jitters.
When the Fed moves, so do global markets. It remains a priority for savvy investors to have a finger on the pulse of the U.S. central bank. The next FOMC meeting is scheduled for March 15-16. Stay tuned then to see if the Federal Reserve really will enact its first interest rate hike.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
