Communications from Federal Reserve officials were among a string of factors behind the gloomy mood on Wall Street at the end of 2018, adding to concerns about political and economic strains, the central bank said in meeting minutes out Wednesday.
The dollar sagged against its peers on Wednesday in the wake of falling USA yields and as investors remained cautious ahead of the Federal Reserve's policy meeting minutes due later in the session.
Analysts expect minutes of the Fed's January 30 meeting to illuminate the Fed's rationale for signaling its recent series of rate hikes was on hold.
Chairman Jerome Powell underscored the message in his January 30 press conference by saying the Fed would be patient in deciding when and how to adjust policy in the face of a mounting set of risks, including slowing growth in China and Europe, Brexit, trade negotiations and the effects of the five-week US government shutdown.
Experts think that it is likely for the Fed to hike interest rates twice this year, instead of the three or four hikes previously projected.
Unanswered was the question of how long the Fed would remain "patient" on policy, and if the central bank's next policy move would be to ease, rather than tighten, policy.
Inflation in the USA has been muted so far.
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"December FOMC communications were reportedly perceived by market participants as not fully appreciating the implications of tighter financial conditions and softening global data over recent months for the USA economic outlook", the minutes said.
U.S. inflation has so far remained muted, despite a very tight labor market that has cut the unemployment rate to a almost 50-year low.
December's FOMC communications were seen as contributing to a turbulent month in financial markets.
The bar to restarting rate hikes in the near-term seems to be quite high, with several participants arguing that rate increases would be necessary "only if inflation outcomes were higher than in [the] baseline outlook".
Markets largely shrugged off the report, even though it confirmed that the Fed expected to end the sales of investments it had built up in the wake of the 2008 financial crisis to help shore up the financial system.
"Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year", according to the record of the Federal Open Market Committee's January 29-30 gathering released Wednesday.
Fed officials also appeared close to agreeing on a plan to stop reducing their enormous bond portfolio before year's end - a step meant to help ease upward pressure on borrowing rates.