It was tough to envision how the FOMC could make meaningful changes in the market. There were some interesting comment but nothing to shift the market paradigm and the US dollar has been choppy since the report.
The Fed statement said officials wanted to move forward with a cautious taper and that’s exactly what the minutes said. What the Fed didn’t know at the time of the minutes was how the market would react to a taper. So far the reaction has been smooth (almost sanguine) and that might make officials a bit more keen to taper at a faster pace than the comments like ‘measured steps’ and ‘proceed cautiously’ comments in the minutes suggest.
On the other hand, there are real worries about disinflation. The staff forecasts say prices will remain subdued until 2016 and:
Many participants expressed concern about the deceleration in consumer prices over the past year, and a couple pointed out that a number of other advanced economies were also experiencing very low inflation. Among the costs of very low or declining inflation that were cited were its effects in raising real interest rates and debt burdens. A few participants raised the possibility that recent declines in inflation might suggest that the economic recovery was not as strong as some thought.
Low inflation threatens to be the surprise of 2014 but at the moment, officials are inclined to believe better growth will win the day and boost prices.
