Benzinga - by Aaron Bry, Benzinga Editor.
The Federal Reserve released the minutes from its September meeting Wednesday, with a majority of Federal Open Market Committee participants stating one further interest rate hike would be appropriate.
The minutes of the September meeting said the Fed has seen signs that inflation is slowing down and that it will “proceed carefully” with its future decisions regarding interest rates.
Economists React To FOMC Minutes: The Fed appears to be near the end of its interest rate hike cycle, said LPL Financial Chief Economist Jeffrey Roach.
“The Fed is near the end of their rate hiking campaign and the events of the past weekend likely solidify this view,” Roach said. “The risk of overtightening appears to be in balance with the risk of insufficient tightening.”
Roach is referencing the escalation in the conflict between Palestine and Israel: amid global geopolitical uncertainty, central banks are less likely to raise interest rates, potentially causing more financial risk and instability.
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Bill Adams, chief economist for Comerica Bank, echoed Roach's sentiment. Adams said the fact the Fed will "proceed carefully" is the key phrase from the minutes, and that the wording likely signals a rate hike pause during the Fed's next meeting.
That could help explain why the stock market has held up pretty well throughout the week, despite ongoing fighting in the Middle East and the largest escalation in the region in years.
Since Hamas’ surprise attack on Israel over the weekend, the SPDR S&P 500 Trust ETF (NYSE: SPY) is up nearly 2%.
Quincy Crosby, the chief global economist at LPL, offered a slightly different perspective, saying the Federal Reserve may be forced to raise rates again if inflation remains sticky.
If “sticky” core inflation doesn’t untangle at a faster pace, the Fed may need another rate hike after all, Crosby said.
"Tomorrow’s release of the CPI report is a crucial component for the market to assimilate in terms of how quickly inflation is receding."
What's Next: Thursday’s CPI report will give economists more insight into the inflation situation in the United States.
Inflation picked back up throughout the last few months, driven by higher energy and fuel costs. A sharp drop in oil and gasoline prices gave economists optimism that inflation could be back on its way down, but the conflict in the Middle East has helped push oil prices higher again.
Related Link: CPI Preview: Will Consumer Inflation Figures Shift Market Expectations On Fed's Rate Decision?
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