Highlights of the minutes of the FOMC meetings on Dec 17-18, 2013:

  • FOMC participants saw diminishing restraint from fiscal policy
  • Saw ‘ongoing improvement in labor market’
  • Saw ‘moderate’ risks to financial stability
  • Expected inflation rising toward 2% target
  • Saw need to monitor inflation ‘carefully’
  • Many favored tapering in ‘measured steps’
  • Many members wanted to ‘proceed cautiously’ in first cut to QE
  • ‘A few’ members wanted to lower unemployment threshold
  • Most members wanted to leave 6.5% threshold
  • Some participants questioned QE reduction because of low inflation
  • Most judged effectiveness of QE declining as purchases continue
  • Consumer spending appears to be strengthening
  • Full text

The initial market reaction to the minutes is very small. There was a kneejerk higher in USD/JPY and lower in gold but nothing substantial. The comment about lowering the unemployment threshold is interesting but it doesn’t look like there is enough support to make it happen, especially after the subdued reaction to the taper.

I was looking for comments on business investment and here’s what the Fed had to say:

Business investment appeared to be advancing at a moderate rate. A number of the fundamental determinants of business investment were positive: Business balance sheets remained in good shape, cash flow was ample, and input costs were subdued. Business contacts in a number of Districts were reportedly somewhat more confident about the outlook than they had been earlier in the fall, but a couple of participants reported that their contacts continued to focus on investments intended to reduce costs and were still cautious regarding investment to expand capacity, or that concerns about health care costs were holding back hiring. In the manufacturing sector, production appeared to be increasing at a solid rate according to both national and most of the regional surveys of activity, and the available indexes of future activity continued to suggest optimism among firms. Renewed export demand and a buildup in auto inventories, which may be reversed in 2014, were cited as contributing to the recent gains in production. Participants heard positive reports from their contacts in the technology, rail, freight, and airline industries, and activity in the energy sector remained strong.