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The Net Worth Club Take on the FOMC Minutes
The Fed pivots dovish—QT slows, real rates drop, and gold’s path to $3,000 looks clearer
The latest FOMC minutes came in even softer than I expected despite the already dovish tone we’ve been seeing.
1. QT Wind-Down Coming Sooner Than Expected
The Fed is signalling that quantitative tightening could wrap up as early as this spring, thanks to concerns about liquidity swings tied to the debt ceiling mess.
A key quote:
Regarding the potential for significant swings in reserves over coming months related to debt ceiling dynamics, various participants noted that it may be appropriate to consider pausing or slowing balance sheet runoff until the resolution of this event.
Translation: The Fed is prioritizing market stability over aggressive tightening…
More liquidity means looser financial conditions - bullish for risk assets.
2. Inflation Talk is Softer Than Powells Recent Tone
The minutes also walked back some of Powells more hawkish remarks, with the committee broadly agreeing that inflation is softening.
The elevated Q1 CPI prints?
The Fed seems to be chalking them up to flawed seasonal adjustments.
Another key quote:
Most participants commented that month-over-month inflation readings in November and December had exhibited notable progress toward the Committees goal of price stability, including in some key subcategories.
Some participants remarked that reported inflation at the beginning of the year was harder than usual to interpret because of the difficulties in fully removing seasonal effects, and a couple of participants commented that any increase in reported inflation in the first quarter, due to such difficulties, would imply a corresponding decrease in reported inflation in other quarters of the year.
The Big Picture: USD Looks Weak, Real Rates Set to Drop
The Fed is now playing defence and willing to sugarcoat liquidity conditions far more than the ECB or BoJ.
That makes the USD a sell from here on a relative monetary policy basis.
Plus, with the Fed openly acknowledging disinflation, real rates seem free to drop… something markets might not have fully priced in yet, but we’ll see.
Bottom line?
The Fed is back in the business of keeping markets happy - for now, which excites me.
If inflation fears persist and QT slows down, gold should remain supported or even trend higher as a hedge against uncertainty.
Which means, gold to $3,000 in the short term. We’re almost there…
Watch how equities, bonds, and gold react in the coming weeks, as it could be a green light for risk-on trades.
Fingers crossed.
As always, happy hunting!
