Americans are getting ready for food, family and football on Thursday, but investors may still want to hold off until a little bit later Wednesday before starting to give thanks.
That’s because the Federal Reserve will release the minutes from its latest meeting at 2pm ET, which could provide more clues about the central bank’s thinking on inflation and interest rate hikes.
At its November 2 meeting the Fed raised rates by three-quarters of a percentage point — its fourth straight hike of such a large magnitude. But Fed chair Jerome Powell suggested at a press conference that the Fed may soon begin to slow the pace of hikes.
Other Fed members, most notably vice chair Lael Brainard, have hinted as much in recent speeches, too. Yet there have been confusing signals from other Fed officials, who have continued to stress that inflation remains high and must be brought under control.
With that in mind, traders are now pricing in a more than 71% chance that the Fed will raise rates by only a half-point at its December 14 meeting, according to futures contracts on the CME. That’s up from odds of 52% for a half-point hike a month ago, but lower than an 85% likelihood of a half-point increase that was priced in just last week.
A recent batch of inflation reports seem to suggest that the pace of runaway price increases is finally starting to slow to more manageable levels. The job market remains relatively healthy as well, although the most recent jobless claims figures ticked up from a week ago.
All eyes on the consumer ahead of Black Friday and the holidays
But as long as the labor market remains firm and inflation pressures continue to ebb, the Fed will likely pull back on the magnitude of its rate hikes.
Some experts are growing concerned that if the Fed goes too far with rates, the increases could eventually slow the economy too much and potentially lead to much higher unemployment, job losses and even a recession.
The Fed’s rate hikes have had a clear impact on the housing market, with surging mortgage rates helping to put a dent into home sales.
Still, Wall Street is growing more confident that the Fed might be able to pull off a so-called soft landing. The Dow soared 14% in October, its best month since January 1976. The Dow is up nearly 4% more in November and is now only down 6% this year.
The S&P 500 and Nasdaq also have rebounded sharply since October, but both of those broader market indexes remain down more sharply for the year.