Inflation remained well above the Committee’s longer-run goal of 2 percent and the labor market remained very tight, contributing to continuing upward pressures on wages and prices – is what the minutes of the Federal Open Market Committee (FOMC) meeting that took place on January 31-February 1 released on February 22 at 2 p.m. revealed.

Annual inflation in December came in at 6.5%, down from 7.7% seen in November 2023. But, inflation still remained high and beyond the Fed’s target of 2 percent. In order to avoid a hard landing of the economy, the Fed had to resort to slowing down the pace of rate hikes.

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On February 1,the Federal Reserve raised its benchmark interest rate by 0.25% bringing the target range to 4.5%-4.75%, the highest since October 2007. On February 14, the US CPI data for January showed that inflation had moderated slightly. Annual inflation fell to 6.4% in January, down from 6.5% in December. Furthermore, according to monthly job figures, the United States added 517,000 jobs in January, and the unemployment rate fell to 3.4%, the lowest level in 53 years.

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While the Jan. 31-Feb. 1 meeting ended with a smaller rate hike than most expected, officials stressed that inflation is a major concern. In addition, a robust job sector and the strong retail sales data is keeping Fed busy in raising rates. Some participants noted that the probability of the economy entering a recession in 2023 remained elevated.

Moderating inflation in the United States and improving global growth prospects might have lifted market sentiment. While most Desk survey respondents of Fed expected subdued growth or a mild recession in 2023, market participants continued to see notable uncertainties ahead, including prospects for a deeper downturn or the potential for more persistent inflation. US stocks ended the day lower as markets expected the rate to remain higher for longer. As a result, a damaging effect on the economy is expected over time.

Investors are now looking forward to Thursday’s release of the latest GDP and weekly jobless claims data, as well as earnings reports from Alibaba, Bath & Body Works, and Beyond Meat, among others.