US Fed Minutes (Apr 28-29)

The minutes from the Fed’s late April meeting were even more hawkish than expected based on the initial post meeting communications, which had been largely unchanged despite some dissents. The most striking line was that “a majority of participants” believed “some policy firming would likely become appropriate if inflation were to continue running persistently above 2 percent”. In our baseline scenario, elevated but gradually easing inflation keeps the Fed on the sidelines this year, whereas it would take our adverse scenario, with inflation rising further, for us to expect the Fed under new leadership to tighten policy.