The Minutes of the Federal Reserve’s Federal Open Market Committee (FOMC) meeting on December 16 and 17 are released on Wednesday (7 January 2015) at 2pm eastern US time (1900GMT). Here is a quick preview, with some comments from various analysts.
You’ll recall that the phrase ‘considerable time’ was replaced with ‘patient’ when referring to the timing of the first interest-rate increase … and that the two phrases mean pretty much the same thing to the committee … the new guidance was “consistent with its previous statement” (if you’re not confused yet as to why they even bothered to change the wording then, you’ve done better than me
).
Also, Yellen said there would be no rate hike at the next two meetings (January 27-28 and March 17-18) at least (“a couple means two”).
Analysts comments (rounded up from various sources including Bloomberg, MNI and more):
Eric Green, Toronto Dominion’s head of U.S. rates and economic research:
- Minutes are likely to show discussion centered on the market’s underpricing of policy makers’ prevailing bias to raise rates
- Discussion on falling inflation premiums, lower yields to gain more attention
- Some clarity on how to interpret change in forward guidance would be “helpful”
- lower oil is not a disruption concern … it is stimulative
- The “prevailing bias at the Fed remains intact and we look for the March meeting to lay the groundwork for rate hikes in Q3.”
BNP Paribas strategists Dan Katzive and Vassili Serebriakov:
- Markets will look to the Minutes for insight “into the likely timing and pace of Fed policy tightening”
- But … “with most FOMC members likely unsure themselves on these points and stressing data dependence, it is questionable whether this release will really provide a strong signal for markets”
- The “risks for the USD are probably skewed to the downside heading into the release … the USD has often reversed its immediate post-meeting reaction on the release of the minutes, especially following big post FOMC moves and the USD gained sharply in the aftermath of the December meeting”
Dana Saporta, director of U.S. economic research at Credit Suisse Securities USA:
- “The minutes could provide some background on the decision to adopt the ‘can be patient’ language and perhaps shed light on the degree of committee support for the Yellen ‘at least the next couple of meetings’ comment”
- “the decline in the prices of energy and other commodities as well as lower long-term interest rates would likely provide an offset to the higher dollar and weaker foreign growth”
Roberto Perli of Cornerstone Macro (and a former associate director of monetary affairs at the Federal Reserve):
- FOMC probably showed “broad agreement on the language change and probably some more confidence on a mid-2015 liftoff”
- “There might be also some discussion about eventually communicating their views of the pace of tightening once liftoff happens”
Neil Dutta, head of U.S. economics at Renaissance Macro Research:
- financial-market turmoil before the meeting was a source of concern among some policy makers
- “The concerns over the global economy are likely to be greater in the minutes than the FOMC statement … This is natural because the minutes will tend to give more of a venue for the FOMC officials that do not share in the majority opinion”
Michael Feroli, chief U.S. economist at JPMorgan Chase & Co.:
- “The view adopted by the committee was that low inflation was likely to be transitory, and that diminishing slack should eventually exert upward pressure on inflation, though there was probably a range of views”
