With Fed Chair Powell having blown his dovish wad yesterday, today’s FOMC Minutes (from a hawkish Fed statement) – as dated as they are – seem like a bit of non-event.
The main headline from the minutes is that almost all Fed officials saw another rate-hike “warranted fairly soon.”
But The Fed discussed modifying language on “Further Gradual” hikes.
Additional key highluight include:
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Fed: IOER change may be needed soon, possibly before Dec. FOMC
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Fed officials discussed need for ‘flexible’ approach on rates
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Many fed officials: Statement needs more data-dependent focus
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Almost all fed officials saw gradual hikes consistent with goals
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Fed minutes: policy not pre-set, upsides and downsides weighed
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Fed saw risks in trade, corporate debt, low inflation expectations
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Fed noted upside risks of fiscal stimulus, strong consumers
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Several fed officials concerned on non-bank corporate debt
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Fed held broad discussion over need for abundant reserves
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Fed discussed benefits of targeting rate other than fed funds
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Fed officials saw above-trend growth slowing over medium term
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Fed officials saw price gains consistent with sustained 2% goal
Specifically…
On data dependent:
Many participants indicated that it might be appropriate at some upcoming meetings to begin to transition to statement language that placed greater emphasis on the evaluation of incoming data in assessing the economic and policy outlook; such a change would help to convey the Committee’s flexible approach in responding to changing economic circumstances.
On further gradual language:
Almost all participants reaffirmed the view that further gradual increases in the target range for the federal funds rate would likely be consistent with sustaining the Committee’s objectives of maximum employment and price stability.
On fairly soon language:
Consistent with their judgment that a gradual approach to policy normalization remained appropriate, almost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations.
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The market had already given up on The Fed’s forecasts…
And expectations in the markets are now for less than one 25bps rate-hike next year…
Furthermore, it is worth noting that the US macro surprise index is at its weakest in over a year
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