22 November 2023
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FOMC minutes suggest rates will remain at elevated levels

Daily Outlook 22 November 2023

By Jeanne Walters

Minutes of the 1 November FOMC meeting, where rates were kept unchanged for a second time to leave the upper bound of the Fed funds rate at 5.5%, were published late on Tuesday. While the decision to keep rates on hold had largely been anticipated, comments made at the press conference by the Fed Chairman, Jerome Powell, were interpreted as a dovish pivot. The more dovish tone was noteworthy given that the decision came amidst robust economic data releases, including strong Q3 GDP. The minutes suggest that tighter credit conditions were a key factor in the committee’s decision. Not only had there been a sharp rise in longer-term Treasury yields ahead of the decision, but committee members also had pre-release data for the Q3 Senior Loan Officer Opinion Survey, which suggested it was becoming harder for small firms to access credit. The minutes also highlighted that while members saw the labour market at “tight”, there were some signs of it cooling off. Importantly, the minutes showed that all committee members anticipated that rates would need to remain at restrictive levels for “some time”. Separately, Richmond Fed President Thomas Barkin, highlighted that while price growth has slowed, the progress “isn’t sufficient for the Federal Reserve to declare victory on inflation”.

The European Commission have warned the French, Belgian, Finnish and Croatian governments that they are at risk of contravening the EUs fiscal guidelines, which had been suspended during the pandemic period but will come back into force in January 2024. There are no automatic repercussions as a result of being placed on the fiscal watchlist, but it can result in penalties further down the line. Other major EU governments, including Italy and Germany, have also received assessments that they are not “fully in line” with the growth and stability pact rules.

Following last week’s announcement that the Dubai Department of Finance planned to sell a 24.99% stake in Dubai Taxi Company, the price range for the IPO was set between AED1.80 and AED1.85 per share. Reports suggest that there was strong demand, with the orders placed within one hour of opening being sufficient to cover the deal.

Today’s Economic Data and Events

16:30 UK Autumn statement

17:30 US initial jobless claims, w/e Nov 18: forecast 227k

17:30 US durable goods orders, October: forecast -3.2% m/m

19:00 EC consumer confidence survey, November: forecast -17.8

Fixed Income

  • Reaction to the FOMC meeting minutes was relatively muted in the treasury markets, with the minutes highlighting that committee members expected rates to have to stay elevated for “some time”. The 2yr yield fell 4bps to 4.8723%, while the 10yr yield dropped 3bps to 4.3926%.
  • Yields moved lower across most European sovereign bonds on Tuesday. Yields on 10yr Gilts fell 2bps to 4.1024%, while the 10yr Bund yield dropped 5bps to 2.565%.


  • There were marginal gains for the dollar against a basket of 6 major peers on Tuesday. This move was however in large part driven by a fall in EURUSD, which declined 0.27% to reach 1.0911. In contrast, GBPUSD rose 0.27% to 1.2539.
  • Moves in commodity currencies were also mixed against the dollar. AUSUSD fell very slightly, dipping 0.02% to 0.6556, while NZDUSD gained 0.2% to 0.6049. CADUSD fell 0.17% to 1.3701.


  • US equity markets fell on Tuesday, on the back of the Fed meeting minutes. The Dow Jones declined 0.18%, the S&P 500 fell 0.2% and NASDAQ dropped 0.59%.
  • European equity markets also edged lower on the day, with Eurostoxx 50 and the CAC 40 both falling 0.24%. The FTSE 100 fell 0.2% after comments from the Governor of the Bank of England, Andrew Bailey, that it was “far too early to be thinking about rate cuts”.
  • Locally, both the DFM and the ADX closed 0.4% lower.


  • Oil prices were broadly flat on Tuesday, ahead of the OPEC+ meeting taking place over the weekend. Brent futures rose 0.16% to close at USD 82.45/b while WTI gained 0.22% to USD 77.77/b.

Written By

Jeanne Walters Senior Economist

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