US FOMC Minutes Draw Attention... Searching for Tapering Signals

[Asia Economy Reporter Ji Yeon-jin] Investors are focusing on the "voice" of the U.S. central bank. On the 19th (local time), the minutes of last month's Federal Open Market Committee (FOMC) meeting will be released, and Federal Reserve officials, including Vice Chairman Richard Clarida, will take the podium one after another.

The recently announced U.S. consumer price inflation rate for April exceeded market expectations, reigniting concerns about the Fed's early tightening due to inflation. This widened the decline, especially among U.S. tech stocks that surged after COVID-19, and the domestic stock market also showed a steep downward trend. Industry experts expect that the April FOMC minutes will show that Fed officials generally maintained optimism about the economy while reaching a consensus on the need to continue a accommodative monetary policy stance.

However, since the Dallas Fed President recently expressed a hawkish view that asset purchase tapering should be implemented early, there is a possibility that a minority opinion mentioning the need for early tightening will appear in the April minutes as well. Considering that inflation indicators are rising more than expected due to supply disruptions and base effects, the Fed may gradually consider tapering in line with economic expansion, even if it does not bring forward interest rate hikes.

Yumi Kim, a researcher at Kiwoom Securities, said, "If early tightening by the Fed becomes visible amid recent inflation concerns, investment sentiment in the financial market could quickly shrink, increasing market volatility," adding, "In May and June, when inflation may expand due to base effects, Fed officials' remarks may take a relatively dovish stance to stabilize the financial market."

Additionally, attention should be paid to the monthly manufacturing and non-manufacturing PMI indices for the U.S. and Eurozone this week. It is important to see whether the ongoing domestic and external demand is alleviating concerns about rising corporate costs amid increased cost burdens. The market is expected to maintain a relatively optimistic stance by staying above the baseline (50), which could serve as a buffer against inflation concerns.

This content was produced with the assistance of AI translation services.