With Fed speakers attempting to jawbone the current narrative back from the uber-dovish record-high-creating Fed statement, all eyes today were glued on how hawkish the statement would be with regard 2016 hikes – few, some, or many? Since The Fed statement, GDP expectations have crashed to cycle lows but that has not seemed to stop The Fed:
- *FED OFFICIALS SPLIT IN JULY ON WHETHER RATE HIKE NEEDED SOON
- *A COUPLE FED OFFICIALS BACKED JULY RATE HIKE
- *FOMC VOTERS AGREED TO WAIT FOR MORE DATA TO GAUGE ECONOMY
But perhaps most notably, several Fed officials are concerned of financial risks from too low rates.
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Pre-FOMC Minutes: Sept Odds 28%, Dec Odds 55%, S&P Futs 2173, 10Y 1.56%
Rate hike odds have risen again as the stock market rallied…
And since The fed meeting, stock-strength-driven rate-hike odds have mirrored the collapse of economic growth expectations…
But we note that despite a 14bps range, Treasury yields – across the entire complex – are practically unchanged from The Fed statement…
Some additional headlines from the minutes:
- *SEVERAL FED OFFICIALS CONCERNED OF FIN. RISKS FROM LOW RATES
- *SEVERAL FED OFFICIALS SAW AMPLE TIME TO ACT IF INFLATION RISES
- *SEVERAL FED OFFICIALS WANTED TO WAIT FOR MORE INFL. CONFIDENCE
- *FOMC VOTERS DIVIDED ON WHETHER JOB-GAIN PACE WORRISOME
And finally, Jim Bullard dropped this…
- *BULLARD: CENTRAL BANKS GLOBALLY ARE RETHINKING MONETARY POLICY
All it took was 667 rate cuts and printing $10 trillion…? But we presume will keep doing the same stuff expecting a different result?
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Here are the key sections breaking down the Fed's intentions:
On the "prudent" to wait front:
Members generally agreed that, before taking an-other step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity.
"Coupled" wanted more evidence for 2% inflation, but "Some" anticipated a sooner rate hike:
A couple of members preferred also to wait for more evidence that inflation would rise to 2 per-cent on a sustained basis. Some other members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation.
And the dissenter, Esther George:
One member preferred to raise the target range for the federal funds rate at the current meeting, citing the easing of financial conditions since the U.K. referendum, the return to trend economic growth, solid job growth, and inflation moving toward 2 percent.
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Full FOMC Minutes below
via http://ift.tt/2beAvHU Tyler Durden