US: FOMC Minutes

Wed Feb 21 13:00:00 CST 2018

The Federal Reserve published minutes of its January 31 FOMC meeting. There were no surprises. The meeting was the last chaired by Janet Yellen and before Jerome Powell took over a few days later as chairman. At that time, the Fed left its benchmark interest rate range unchanged between 1.25 percent and 1.5 percent and upgraded its assessment of the economy and confidence that inflation was moving to its 2.0 percent target.

Committee members were more positive about the outlook, expecting that with further gradual adjustments to monetary policy, economic activity would expand at a moderate pace and labor market conditions would remain strong. They were optimistic about achieving their inflation target of 2 percent. The committee now expected 2018 economic growth to exceed their December forecast estimates. A number of participants indicated that they had revised their economic growth forecasts upward in the near term relative to those made for the December meeting.

Members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate. They judged that a gradual approach to raising the target range would sustain the economic expansion and balance the risks to the outlook for inflation and unemployment. Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate.

Equities advanced after the minutes were published while Treasuries were mixed.

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.

Eight times a year