The Fed minutes showed considerable discussion regarding the timing of the first rate hike. Because of lower oil prices, the first increase could occur even with inflation below the Fed's 2 percent target. The drop in oil prices was seen as being favorable to the consumer sector. In contrast, some participants noted that the labor market is weaker than indicated by the unemployment rate. Most participants saw little risk of wage inflation.
Downside and upside risks to the economy are seen "nearly balanced" with foreign deterioration as the largest downside risk.
Fed staff economists were somewhat more upbeat about the economy.
"The information reviewed for the December 1617 meeting suggested that economic activity was increasing at a moderate pace in the fourth quarter and that labor market conditions had improved further."
It was noted that employment and industrial production had picked up along with healthy personal spending.
On guidance, as noted in the earlier statement, "can be patient" language was seen as the prior use of "considerable time" for policy rates remaining low. The new language is seen as giving the Fed more flexibility. Rate changes are still data dependent.
"Most participants thought the reference to patience indicated that the Committee was unlikely to begin the normalization process for at least the next couple of meetings."
Overall, the Fed is taking a cautious approach to when the first rate hike takes place and on the pace of later increases.
The Federal Open Market Committee issues minutes of its meetings with a lag. The minutes of the previous meeting are reported three weeks after the meeting.
The FOMC has changed dramatically in the transparency of its operations. It now discloses policy changes at the end of each meeting. Historically, the Fed used to keep investors guessing about policy changes and Fed officials did not appear on the speaking circuit as frequently as they do now.
Since the Fed moved up the release of the minutes to three weeks after a meeting from six in January 2005, the minutes have become a market mover as analysts parse each word looking for clues to policy. However, the minutes do include the complete economic analysis compiled by Fed officials and whether or not any FOMC members have voiced opinions at odds with the rest of the group.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. However, the Fed discloses its official view at the end of each FOMC meeting with a public statement. Fed officials make numerous speeches, which freely give their views to the public at large.
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