The Fed is starting to be cautious.

“All members of the Federal Open Market Committee (FOMC) believed that it could proceed cautiously” - the original text of the minutes of the most recent meeting of the FED.

Inflation in the US has slowed as October consumer price data showed positive signs. While the Fed has not declared victory, the market has begun to discuss how long to hold the 5.25%-5.50% level.

The minutes also said: “Noting that further tightening of policy would be appropriate if progress towards the target was not met,” the statement suggested that there would be some degree of surprise shock to prompt further rate hikes.

This signal was absent from the September minutes, when most Fed officials still judged that another rate hike would be needed.

In contrast, the latest policy meeting minutes said that “all participants judged it appropriate to maintain” current interest rates – a stance that will be clarified at the December 12-13 meeting.

The document drew little reaction from financial markets, with most confirming that the Fed was done raising interest rates.

The minutes showed Fed policymakers are grappling with conflicting economic signals that have compounded the risks to the economy. Breezy inflation remains a concern, along with overly tight credit controls that are hurting the outlook for the US economy.

The US economy just hit a stellar 4.9% annual growth rate in the third quarter. That’s good for the US government , but not so good for the Fed. But financial markets have pushed interest rates higher for US households, businesses and the government, threatening to stifle economic growth and employment more than is needed to get inflation back to the 2% target.

Inflation “remains well above” target, likely requiring Fed policy to “remain restrictive for some time until a sustained decline in inflation is evident,” according to the minutes.

“The overall tone of the FOMC minutes was cautiously hawkish,” said Ian Lyngen, an expert at BMO Capital Markets.

Fed Chairman Jerome Powell used the term "prudent" in a recent press conference to describe the Federal Reserve's efforts to balance rising inflation with signs of a slowing US economy. His stance is valid. The Fed still has the ability to "soft land."

In fact, the US Federal Reserve's late start to raising interest rates (about a year after prices started climbing) allowed the US economy to grow more, a study by the New York Fed released on Tuesday found.

Policymakers, however, appear reluctant to hint at the way forward.

“Inflation has given us some false alarms,” Mr. Powell said at an International Monetary Fund research conference earlier this month. “If further tightening becomes appropriate, we will not hesitate to maintain it. However, we will continue to proceed carefully to address both the risk of being misled by a few months of good data and the risk of over-tightening.”

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