The US Federal Reserve published the minutes of its December meeting

The minutes of the meeting held on December 12-13 were announced by the Federal Reserve.

Members of the Federal Open Market Committee (FOMC) suggested that interest rates are probably at or close to their highest point.

After the release, the dollar index tested 3-week highs above 102.7.

GDP growth in the U.S. slowed down from its robust expansion in the third quarter, according to the minutes from the Federal Reserve's latest meeting released on Wednesday. The labor market conditions were still tight, with steady yet strong job growth and low unemployment.

In November, the price index for personal consumption expenditures (PCE) decreased to 3% year-over-year, indicating a significant decrease in consumer price inflation, which had previously been high.

The year-over-year (YoY) core Personal Consumption Expenditures (PCE) price inflation decreased to 3.5%. Both the headline and core PCE inflation were significantly lower than the levels from the previous year.

At the meeting about inflation, it was observed that there had been considerable advancement in 2023 towards the Federal Reserve's goal of 2% inflation.

In recent months, Treasury yields have experienced a significant decrease (especially at longer maturities) following a sharp increase as investors seemed to view the data as reducing the chances of long-term inflationary pressures.

The market's expectations for the key rate beyond the next few months have significantly decreased since the last meeting.

FOMC members suggested that interest rates may have reached their highest point in this cycle of tightening, but they also noted that the future of monetary policy will depend on the performance of the economy.

The participants of the meeting concurred that, as they assess monetary policy more thoroughly, they will keep an eye on how incoming data affects the economic outlook.

CNBC reported that in December, Federal officials determined that interest rate reductions were probable in 2024. However, the minutes from the meeting, which were released on Wednesday, did not provide much information regarding when this could take place.

Members of the Federal Open Market Committee (FOMC) stated that they anticipate three reductions of 25 basis points each by the end of 2024. Nevertheless, the documents demonstrate a considerable degree of doubt regarding how this will be achieved, or if it will even occur.

Despite warnings from Federal Reserve officials, markets anticipate the central bank to reduce rates significantly in 2024. Rate futures indicate six cuts of 25 basis points in 2021.

TD Securities commented that, while it is beneficial to plan ahead for the conclusion of quantitative tightening (QT), the Federal Reserve must find a way to do so without giving the impression to markets that QT is coming to an end.