USA_ FOMC Minutes Reiterate “Careful” Approach Amid High Uncertainty, Raise Possibility of Slowing Runoff; We Now Expect Treasury Runoff to End in May

Summary of FOMC Minutes - January Meeting Industry Overview - The document pertains to the Federal Open Market Committee (FOMC) and its monetary policy discussions, reflecting the economic outlook and potential adjustments to monetary policy in the United States. Core Points and Arguments 1. Monetary Policy Approach: The majority of FOMC participants favored a careful approach to additional adjustments in monetary policy due to elevated uncertainty regarding the economic outlook, neutral interest rates, and potential government policy changes [2][1] 2. Fed Funds Rate: The vast majority of participants judged that the fed funds rate remains in restrictive territory, with a desire to see further progress on inflation before making adjustments [2][1] 3. Inflation Risks: Almost all participants assessed that risks to achieving the FOMC's dual-mandate goals were roughly balanced, with inflation risks skewed to the upside due to potential changes in tariff and immigration policy [3][1] 4. Inflation Expectations: Some participants noted recent increases in inflation expectations, while many emphasized that long-term expectations remain well-anchored [3][1] 5. Economic Activity Risks: Potential downside risks were identified, including a weaker labor market and tighter financial conditions, alongside upside risks from a favorable regulatory environment and strong consumer spending [6][1] 6. Economic Forecast: The Fed staff's economic forecast remained similar to the previous meeting, with inflation in 2025 projected to be similar to 2024's rate, influenced by trade policy assumptions [6][1] 7. Monetary Policy Framework Review: The FOMC began a review of its 2025 monetary policy framework, focusing on longer-run goals and communication practices, emphasizing the need to reconsider elements from the previous review [7][1] 8. Balance Sheet Runoff: Many participants suggested structuring purchases to align the maturity composition of the portfolio with Treasury debt, and some indicated a potential pause or slowdown in balance sheet runoff until the debt ceiling is lifted [7][1][6] 9. Runoff Expectations: The expectation is for the Committee to slow the pace of balance sheet runoff, with discussions anticipated in March and a decision likely in May, with runoff expected to end by the end of Q3 [7][1] Additional Important Content - The document includes contact information for Goldman Sachs analysts involved in the report, emphasizing the importance of considering this report as one factor in investment decisions [4][5] - Regulatory disclosures and compliance information are provided, indicating the firm's policies regarding analyst independence and conflicts of interest [10][11][20]