US: FOMC Minutes

Wed May 23 13:00:00 CDT 2018

The setting of the FOMC early this month was one of inflation as the core PCE price index jumped 3 tenths to 1.9 percent just before the meeting. In response, the FOMC emphasized the "symmetric objective" of their price targeting, that they would not let inflation run too far beyond their 2 percent goal but that a little overshooting is still consistent with their policy. Though members generally expected inflation to remain near 2 percent, there was talk that another rate hike would coming be "soon" which was and also is consistent with market expectations for a hike at the June meeting.

Concerns over tariffs and the risk of trade wars were limited though rising Treasury yields did catch their attention with members stressing the importance of a stable yield curve, that short rates shouldn't rise in excess of long rates. Otherwise there was very little change: members agreed the economy was growing at a moderate rate and that the labor market continued to strengthen.

Since the meeting, inflation concern has eased following a run of soft data and the yield curve has held steady, posing no recession signal. There is no immediate reaction in the bond market to the minutes with the 10-year yield holding at 3.02 percent.

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