Bank of Montreal remarks on the minutes published on Wednesday:
- The Minutes from the May 1st FOMC meeting struck a decidedly hawkish tone -- one that was in-line with expectations given the fact that at the time of the meeting, the Fed didn't have the April CPI report.
- The trajectory of inflation is now considered less dire than what prevailed at the time of the meeting and, therefore, we're not surprised to see the market dismissing the update as stale information.
Key observations include the hint at rate hikes:
- the Minutes noted that "Various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate." Powell (based on his comments at the press conference) most likely wasn't among the ranks.
- In keeping with the perceived stickiness of inflation at the time of the meeting, it wasn't surprising to see that "A number of participants noted uncertainty regarding the degree of restrictiveness of current financial conditions and the associated risk that such conditions were insufficiently restrictive on aggregate demand and inflation."
