Home Morning Commentary Morning Commentary – FOMC Minutes

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On Wednesday afternoon the FOMCs report from its most recent 2-day meeting, where it sets rate policy for the US, was released.  In recent months this was able to create some large market reactions when traders read the transcripts.  In these records, traders are looking for clues as to what the Fed members said and possibly how it may react in the future.

A few headlines that hit the tape at 2pm ET…

 

 

  • MOST FED OFFICIALS BACKED CONTINUED GRADUAL RATE HIKES
  • FED: FASTER INFLATION FROM TAX CUT AMONG REASONS TO SPEED HIKES
  • SEVERAL FED OFFICIALS CONCERNED BY LOW INFLATION EXPECTATIONS
  • COUPLE OF FED OFFICIALS CONCERNED BY FINANCIAL STABILITY RISKS
  • FED OFFICIALS GENERALLY AGREED FLATTER YIELD CURVE NOT UNUSUAL

 

 

A few important paragraphs from the Fed’s release follow…

 

“Participants discussed several risks that, if realized, could necessitate a steeper path of increases in the target range; these risks included the possibility that inflation pressures could build unduly if output expanded well beyond its maximum sustainable level, perhaps owing to fiscal stimulus or accommodative financial market conditions.”

“A few other participants mentioned that they saw as appropriate a pace of additional policy tightening through the end of 2018 that was somewhat faster than that implied by the December SEP median forecast. They noted that financial conditions had not materially tightened since the removal of monetary policy accommodation began, that continued low interest rates risked financial instability in the future, or that the labor market was increasingly tight.

 

If it wasn’t clear that the Fed is willing to hike rates even faster than most think, read those paragraphs again.  The market didn’t seem to care today; it continued to go up despite the news.

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