FOMC Minutes Signal Governors Divided Over When To End Policy-Easing

Having cut rates (as expected) and suffered dissents (2 hawkish, 1 dovish) at the September FOMC meeting, things have not gone exactly as planned for Mr. Powell and his pals.

Stocks are weaker, the dollar is stronger, gold is flat (so they’ll be happy, but remember the Golden Week seasonals), and the long-bond is ripping higher (in price)…

And The Fed rate-cut appears to have perfectly top-ticked US Macro data also…

Source: Bloomberg

Since The Fed cut rates in September, the market has shifted to demanding more, now pricing in 1.4 more rate-cuts by year-end, considerably more dovish than the 0.8 rate-cuts on the day they actually cut in September…

Source: Bloomberg

But, as far as buying insurance for a worsening trade outlook, The Fed’s timing was good…

Source: Bloomberg

And don’t forget that the Fed’s balance sheet has started to re-inflate (NotQE)…

Source: Bloomberg

And its liquidity bailouts have not stopped…

Source: Bloomberg

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As Bloomberg Economics noted:

“A core focus in the meeting minutes will be to better assess not only the firmness of officials’ resolve to avoid substantial additional accommodation, but also the conditions which would lead them to potentially reconsider.”

So, under the hood, what is it that The Fed’s tightly narrative-controlled Minutes wants us to understand (bearing in mind, of course, that Powell unveiled NotQE yesterday)…

Most notably, The Fed appears more divided than was assumed:

• *FED MINUTES SHOW DEBATE EMERGING ON WHEN TO END POLICY EASING

• *A FEW OFFICIALS JUDGED MARKETS WERE PRICING TOO MUCH FED EASING

• *SEVERAL SUGGESTED FED SHOULD CLARIFY WHEN EASING WOULD END

With inflation the key worry:

• *FED OFFICIALS GENERALLY VIEWED BASELINE OUTLOOK AS POSITIVE

• *MANY FED OFFICIALS CITED INFLATION IN JUSTIFYING SEPT. RATE CUT

Along with Trade:

• *FED OFFICIALS GREW MORE CONCERNED OVER TRADE, GLOBAL WEAKNESS

 

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Full Minutes Below: