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Fed Minutes Show Focus on Final Rate Level, Preference For Smaller Near-Term Hikes

"A substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate," according to minutes of the Fed's November policy meeting.

Updated at 2:42 pm EST

The Federal Reserve is more focused on the destination of its rate hikes, as opposed to pace required to get there, minutes from the central bank's November policy meeting indicated Wednesday, with officials noting a preference for smaller increases they monitor the impact of their recent tightening. 

The minutes, taken from the Fed's policy meeting that ended on November 2, reflect the broad strokes of the statement that followed its fourth consecutive 75 basis point rate hike, a move that matched the biggest since 1994 and lifted the Fed Funds benchmark to a range of 3.75% to 4%, the highest since 2008.

"A number of participants observed that, as monetary policy approached a stance that was sufficiently restrictive to achieve the Committee’s goals, it would become appropriate to slow the pace of increase in the target range for the federal funds rate," the minutes read. "In addition, a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate." 

"A slower pace in these circumstances would better allow the Committee to assess progress toward its goals of maximum employment and price stability," the minutes added. "The uncertain lags and magnitudes associated with the effects of monetary policy actions on economic activity and inflation were among the reasons cited regarding why such an assessment was important."

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U.S. stocks were added to modest gains following the release of the minutes at 2:00 pm Eastern time, with the Dow Jones Industrial Average up 56 points on the session and the S&P 500, which is up around 3.5% for the month, adding 15 points.

Benchmark 10-year note yields eased lower, to 3.715%, while 2-year notes were pegged at 4.479%. The dollar index, which tracks the greenback against a basket of six global currencies, fell 1.1% to 106.041.

The CME Group's FedWatch now indicates and 80.6% chance of a 50 basis point hike in December, up from 75.8% prior to the release of the minutes, with best largely split on a 'terminal' Fed Funds rate of either 4.75% to 5% or 5% to 5.25% in early spring.