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On May 27, US officials revealed to the media that the US Department of Defense has drafted a list of targets within Iran in preparation for a possible resumption of military action against Iran by President Trump. However, sources analyzed that launching a new strike would be more difficult than before. According to NBC News, the Pentagon is considering naming the potential renewed military operation "The Hammer," targeting nuclear facilities already attacked by US airstrikes last June, including the Natanz and Isfahan facilities. The US military may also target Irans strategic oil facilities on Kharg Island, as well as power plants, military command centers, and communication facilities. According to informed sources, many of the targets already attacked in Iran are considered "easy targets" because they are "either stationary or not deeply buried in bunkers." However, targets such as missile launchers and drones are now more concealed and difficult to approach, making them more difficult to locate and precisely strike than before.May 27th - Influenced by falling oil prices and declining inflation expectations, traders are currently betting that the Bank of England will only raise interest rates once this year. The money market is currently betting on a cumulative 36 basis point rate hike by the end of the year – the lowest expected level in over a month. According to swap contracts linked to the policy meeting date, this expectation is equivalent to a 25 basis point rate hike, with the probability of another hike now less than 50%. Because the UK is highly dependent on imported energy, its economy is extremely vulnerable to the shocks of war; therefore, traders expect that a swift end to a conflict would help further alleviate the pressure on the economy. Just two weeks ago, the market widely expected the Bank of England to raise interest rates twice this year; and in the weeks following the US and Israels attacks on Iran, market expectations even reached as high as four rate hikes. Currently, traders believe there is about a 50% probability that the first rate hike will occur in July. Last week, Bank of England Governor Bailey stated that UK inflation expectations have not "gone off-track"; previously released data showed that UK price growth slowed to its lowest level in over a year in April.U.S. stock futures rallied briefly, with Dow Jones futures up about 0.3%, S&P 500 futures up 0.4%, and Nasdaq futures up nearly 0.9%.The Stoxx Europe 600 index rose to an intraday high, gaining 0.6% on the day.Traders have lowered their bets on a Bank of England rate hike, now expecting a 25-basis-point increase this year.

The Devil Is In The Details: Gold Analysis - Federal Reserve Minutes

Larissa Barlow

Apr 07, 2022 10:33

Analyses of Federal Reserve Minutes 

While both the FOMC statement and Chairman Powell's press conference provide market participants with information about the FOMC's updated and revised monetary policy, it is the release of the minutes that provides investors with significantly greater clarity and understanding. The devil, as they say, is in the details.

 

The Federal Reserve issued the official minutes from its March FOMC meeting today, providing insight into the central bank's current plans to begin unwinding its balance sheet assets. Beginning in March 2020, the Federal Reserve will add around $4.6 trillion to its balance sheet by purchasing $120 billion monthly in mortgage-backed securities ($40 billion) and US Treasury securities ($80 billion), bringing their total to just over $9 trillion.

 

According to Federal Reserve Governor Lael Brainard, the Fed intends to employ a mix of interest rate rises and a quick run-off of the balance sheet to bring US monetary policy closer to neutral later this year.

 

However, the minutes released today imply that the Federal Reserve will unwind around $3 trillion over the next three years, reducing its $9 trillion balance sheet to $6 trillion. While the Fed appears to be indicating a quick runoff of its balance sheet, the reality is that the Federal Reserve's balance sheet will be nearly $2 trillion larger than it was prior to the epidemic.

 

"Participants continued their discussion on plans to reduce the size of the Federal Reserve's balance sheet in a manner consistent with the methodology outlined in the Committee's Principles for Reducing the Size of the Federal Reserve's Balance Sheet, announced following its January meeting."

 

Additionally, the minutes stated, "While no decision was made regarding the Committee's plan to reduce the Federal Reserve's balance sheet at this meeting, participants agreed that significant progress had been made on the plan and that the Committee was well positioned to begin the process of reducing the balance sheet's size as soon as after the conclusion of its upcoming May meeting."


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