Next on the Fed agenda is the release of the minutes to the November 2nd-3rd meeting.
“A watchful eye toward discussions around timing lift-off for the policy rate. The meeting concluded that the FOMC “is prepared to adjust the pace of purchases if warranted by changes in the economic outlook” and so watch for a discussion around the criteria for doing so. A fuller discussion is likely at the December meeting.“
Analysts at Scotiabank offer a sneak peek at what to expect from Wednesday’s FOMC minutes, as the rate hike timing remains on the market’s radar.
As widely expected the Federal Reserve announced an initial monthly reduction of $10bn in Treasuries, and $5bn in mortgage-backed securities, starting this month at its November meeting earlier this month.
In the subsequent press conference Fed chair, Jay Powell went on to push back on the expectation that a rate rise would soon follow. He went on to insist that policymakers were united in thinking that inflation was still very much transitory in nature, and while prices were expected to rise further, they would soon fall back without undermining the recovery.
We’ll get to see how much truth there is in this narrative, with the release of this week’s minutes. Recent comments from some Fed officials would appear to suggest a growing uneasiness at the pace of price rises, and some might suggest there is significant disagreement about how persistent some of these price pressures are.
While the initial reduction of asset purchases was widely expected, it will be interesting to find out how many FOMC members wanted to go faster. This week’s minutes should give us an insight into how that discussion might have played out, and whether more Fed policymakers are inclined to move their dot plots when they meet in a few weeks’ time for the last time this year.
These show the committee is currently evenly split on raising rates next year, however, the maths has changed somewhat since then with the departure of both Rosengren of the Boston Fed and Kaplan of the Dallas Fed, both of whom were probably more to the hawkish side of the debate.