US: FOMC Minutes

Wed Apr 11 13:00:00 CDT 2018

The FOMC raised its policy rate an incremental 25 basis points and members saw further rate hikes ahead, all part of a gradual process that will move policy from accommodative to neutral. The description of the economy at the March FOMC meeting was moderate with inflation, however, still seen as moving toward target this year to their 2 percent policy goal.

Inflation tied to higher steel costs, evident in yesterday's producer price report and perhaps in today's report on business inflation, was not cited as a specific risk at the March meeting though members did note that retaliatory tariff responses posed downside risks with agriculture highlighted as a special risk.

Rising government deficits and tax cuts were other downside risks cited with members uncertain, given a lack of historical examples, how expansionary fiscal policy at a time of high employment will affect the economy. Quarterly FOMC forecasts were posted at the meeting showing members expected two more 25 basis point hikes this year followed by two to three more the next year. Stocks and bonds are showing no significant reaction to today's minutes.

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