19 Nov 2015
Oct FOMC Minutes inserted Dec possibility but little else - UOB
FXStreet (Delhi) – Alvin Liew, Research Analyst at UOB, lists down the key takeaways from the October FOMC minutes.
Key Quotes
“Purposeful inclusion Of December possibility and conveying of shallow trajectory in Oct FOMC, but lack of strong FOMC consensus in favor for Dec hike did not add/remove market conviction for December liftoff. There were three key takeaways from the October FOMC minutes:
1) The Fed policy makers purposefully included language into the October FOMC statement so as to emphasize “while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting [December]”
2) It was noted in the minutes “that beginning the normalization process relatively soon would make it more likely that the policy trajectory after liftoff could be shallow… It was noted that the expected path of the federal funds rate, rather than the exact timing of the initial increase, was most important in influencing financial conditions and thus in affecting the outlook for the economy and inflation” and,
3) There remains significantly differing opinions among the FOMC members whether the necessary conditions have been met for normalizing/tightening policy as “some participants thought that the conditions for beginning the policy normalization process had already been met. Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period. Some others, however, judged it unlikely that the information available by the December meeting would warrant raising the target range for the federal funds rate at that meeting.”
Key Quotes
“Purposeful inclusion Of December possibility and conveying of shallow trajectory in Oct FOMC, but lack of strong FOMC consensus in favor for Dec hike did not add/remove market conviction for December liftoff. There were three key takeaways from the October FOMC minutes:
1) The Fed policy makers purposefully included language into the October FOMC statement so as to emphasize “while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting [December]”
2) It was noted in the minutes “that beginning the normalization process relatively soon would make it more likely that the policy trajectory after liftoff could be shallow… It was noted that the expected path of the federal funds rate, rather than the exact timing of the initial increase, was most important in influencing financial conditions and thus in affecting the outlook for the economy and inflation” and,
3) There remains significantly differing opinions among the FOMC members whether the necessary conditions have been met for normalizing/tightening policy as “some participants thought that the conditions for beginning the policy normalization process had already been met. Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period. Some others, however, judged it unlikely that the information available by the December meeting would warrant raising the target range for the federal funds rate at that meeting.”