The FOMC meeting minutes will be released at 2 PM ET for the February 1 meeting.
The Fed raised rates by 25 basis points at that meeting to a target range of 4.5% – 4.75%. That was the expected move.
Of note is the meeting took place BEFORE the 517K rise in NFP jobs, and the dip to 3.4% in the unemployment rate (lowest since 1969). It also was before CPI and PPI which came in at 0.5% and 0.7% respectively.
Since the meeting, the debt market has sent yields higher in reaction to the increased inflationary risk. Those shifts should not be part of the meeting minutes. As a result, they have the potential to be less alarming.
Highlights from the February statement:
- Repeats that "recent indicators point to modest growth in spending and production and that jobs gains have been robust"
- Statement says "ongoing increases in the target range will be appropriate"
- Unanimous vote
- Says "Inflation has eased somewhat but remains elevated." in a change from " Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures."
- Prior "In determining the pace of future increases in the target range" is now "In determining the extent of future increases in the target range"
Below is the comparison of the February to the December statement:
The post meeting press conference which can be influenced by the chairs own views had Powell saying:
- We are not yet sufficiently restrictive on rates
- Our focus is not on short-term moves in financial conditions
- Our focus is on sustained changes to broader financial conditions
- It is gratifying to see the disinflationary process now underway
- Fed doesn't yet see disinflation yet in core services
- At March meeting we will update our assessment for the rate hike path but we still think there's work to do, we haven't made a decision about where exactly rates need to be
- If data is strong, we could go higher, if data is weaker we could stay lower. Will be data dependent
- It's very difficult to manage the risks of doing too little. If you find out you did too little and it's six or nine months later then there's a risk to inflation expectations
- If inflation comes down too fast, we have tools that can fix that
- We have core services inflation that's not showing disinflation
- It would be very premature to declare victory on inflation
- "We can now say for the first time that the disinflationary process has started"
- We don't see inflation easing in core services ex-housing "we don't see it yet"... "I think we will fairly soon."
- We have no incentive or desire to over-tighten
- Policy is restrictive, we're trying to judge about how much is restrictive enough
- "We're talking about a COUPLE of more rate hikes to get to that level we think is appropriately restrictive."
- "My view is that you're not going to have sustainable return to 2% in core ex housing sector without increased labor slack"
Of note is the word "disinflationary". The chair referred to that term a number of times during his presser. However, he also talked about how service inflation had not yet "showed signs of showing disinflation". In
Having said that, as mentioned, the disinflationary sentiments may have been tarnished a bit post the US jobs report and the CPI/PPI data this month, but traders will be eyeing for references to that term today from the meeting anyway.
The markets remain somewhat skittish, and although the Fed should give something for everyone as they move toward the perceived safe landing for the economy (at least that seemed to be the view at the time of the Fed decision), the reaction in the markets will be on those headlines that are most headline grabbing worthy.
Remember, if you are not confused, you are not paying attention.
I have a feeling, even the Fed feels that confusion, and has to put a wet finger in the air to gauge the winds of change just like traders.
So buckle in.
