NEWSQUAWK PRIMER: Fed minutes are due Wednesday, May 24th, at 19:00BST/14:00EDT; participants gauging how much pause talk was apparent at the May meeting

The minutes are somewhat stale, as always, given the more recent Fedspeak, which has taken a mixed tone. Nonetheless, participants will be looking to see the extent to which the minutes reflect these divergent views and, indeed, how much a potential pause was discussed at the May meeting.

MEETING RECAP: At the May meeting, the FOMC raised rates by 25bps to 5.00-5.25%, in line with expectations, while also hinting at a 'pause' (more on that in a moment) by dropping the language about anticipating more policy firming. The Fed will determine further policy firming based on tightening to date, policy lags, and other developments, Fed Chair Powell said, adding that the central bank remains committed to bringing inflation back down to target and will take a data-dependent approach to determine further rate hikes, adding that there would be an ongoing assessment of whether the Fed has reached a 'sufficiently restrictive' level. The Senior Loan Officer Opinion Survey (SLOOS) was consistent with banks tightening lending standards and slowing the pace of lending. At the same time, the Committee believed that inflation would take a while to come down. Powell also said they are much closer to the end than the beginning; feels as if the Fed is close, or maybe even there.

POST-MEETING COMMENTARY: Since the May meeting, officials have emphasised that their latest policy actions should not be read as a 'pause', and the Committee is prepared to act further to tame inflation pressures. Post-FOMC, Fedspeak has become more nuanced regarding the differences in views over the policy outlook, and some divergences are emerging. In the outright hawkish camp, Logan (current voter) argued that the data does not yet show that skipping a rate hike in June is appropriate, and Governor Bowman (permanent voter) said additional rate hikes were likely appropriate. In the neutral-but-with-hawkish elements camp, Bullard (non-voter) said he would keep an open mind going into the June meeting but was inclined to support another rate hike whilst discussing the need for another 50bps of tightening looking through the year. Bostic (2024) said there was still a way to go to beat inflation.

THE INFLUENTIAL CORE: The influential NY Fed President Williams and Vice Chair Nominee Jefferson (both voters) adopted a more circumspect view, speaking about how inflation remains too high, but offsetting that by leaning into the monetary lags view, saying a year is not enough time to assess the full impact of hikes thus far. Chair Powell took this line, which for some, all but confirms that rates would be on hold at the June 15th meeting announcement. Fed's Kashkari (current voter), who has until recently been one of the outspoken haws, doved it down after comments from Chair Powell, suggesting that he may be able to support an unchanged outing in June, or in his words, a 'skip'. Chicago Fed's Goolsbee (current voter) has been one of the vocal doves in recent weeks, repeatedly warning about the risks of overtightening in the fallout of the banking episode.

23 May 2023 - 16:58- Fixed IncomeResearch Sheet- Source: Newsquawk