What To Expect From FOMC Minutes? Market predictions and reactions - page 15
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FOMC Minutes From Jan 26-27 Meeting - SEB While markets have priced that March hike out, our conclusion after the late January FOMC meeting was that the March meeting is still “live”. While acknowledging the slow growth late last year, the Committee noted that slower inventory investment is one depressing factor thus suggesting that the weakness is temporary. Moreover, the reference to the strong labor market right in the first line of the statement effectively neutralized the growth negativity.
Meanwhile, the Fed said that it is “closely monitoring the global economic and financial developments” in January. Compare and contrast with the December statement when the Fed hiked rates at which point the committee said that it was “taking into account domestic and international developments” so the Fed was definitely more cautious in its latest statement. However, compared to the September statement when the Fed decided not to hike rates after all, the statement read “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term” – definitely more cautious wording than what we saw in the January statement.
In addition to that, the Fed declined to assess the balance of risks in the January statement thus suggesting that the Fed simply has not decided yet and the with 5-6 weeks to go before the March meeting the door to the interest rate hike was still ajar. By contrast, if the Fed had suggested that the risks to the outlook were to the downside it would effectively have shut the door not only to March but probably to subsequent meetings too.
While there are sings that wage growth are beginning to rise as it always has at this stage of the cycle, financial conditions have probably tightened more than what the Fed was looking for in December. As such, our forecast is that the Fed ultimately will decide to hold rates steady not only in March but at subsequent meetings too. Our forecast is for the next rate hike in September.
Ahead of the FOMC Minutes we have a Fed speaker during Asian time today
Federal Reserve Boston President Rosengren speaks at 0000GMT
That's the time I have, but on closer inspection it looks more likely he kicks off at 0030GMT
Perhaps the text is released at 0000. We'll soon find out.
Also on the docket here in Asia today:
2330GMT - Australia - Westpac leading index for January, prior was -0.3%. This indicator is looking a little ill for the Australian economy in the next 6 months or so.
And it strikes me that my bullish preference on the AUD is getting stressed the longer it sits around current levels just going more or less sideways. Plenty of interest for the AUD coming up.
2350GMT - Japan - Machine Orders for December. Capex is a concern for Japanese authorities ... i.e., not enough of it. These will be watched today
FOMC to Steal Wednesday's Headlines The macro calendar is set to bring even more heat on Wednesday, after the Bank of Japan (BoJ) rate decision and US retail sales on Tuesday.
Investors are awaiting key labor updates from the UK, while the US trading session will have inflation data, the Federal Reserve (Fed) interest rate decision and the following press conference.
As there are no data scheduled during the Asian market hours, the action will start with the UK unemployment rate for January. Analyst anticipate an unchanged figure of 5.1%, staying at a decade low.
Average hourly earnings are seen improving only marginally during the same month as the gauge without bonuses is set to hit 2.1% after the 2.0% booked in December. The muted forecast reflects the current low inflation and the inadequate productivity of the labor market.
Looking at USD/GBP, the pair sharply declined from the one month-high of $1.4438 seen on March 11 amid anxiety over 'Brexit', while weaker-than-expected figures might push cable even lower.
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What to expect from the FOMC - some quick bank views Barclays:
BNP
Deutsche bank:
JP Morgan
Morgan Stanley
FOMC Minutes Preview: Hawkish Or Dovish FOMC Minutes (March Meeting) - Wed 4/6 - 2:00 PM ET
BofAML: The dichotomy between dovish remarks from Fed Chair Janet Yellen and more hawkish comments by several of her colleagues on the Federal Open Market Committee (FOMC) sets the stage for the March minutes. The shift lower in the dot plot was accompanied by modest downward revisions to the outlook, with an outright majority of FOMC participants expecting just two hikes this year. At the same time the Committee was unable to agree on a balance of risks, and the mixed messages of post-meeting speeches suggests underlying disagreement. Thus the minutes may give important insight into the nature and degree of discord, particularly among the voting members. We expect the minutes to sound somewhat more hawkish than Yellen's recent remarks, if for no other reason than more hawkish views will be represented.
The market's primary focus will be on the likely timing of the next rate hike. We expect most Fed officials to support keeping every meeting "live," as well as for several to suggest that hiking at one of the next few meetings could be likely under their forecasts. The main division among the participants should be the assessment of risks, particularly around global economic and financial developments. Details about those concerns would be noteworthy. So too would be any indication of whether a majority saw on net balanced or downside risks. If the main concern was that the outlook had recently become more uncertain, that could fade in plenty of time for a June hike. The other big issue will the inflation outlook. Despite the recent rise in core inflation rates — which would seem to exonerate the FOMC's long-held view that low inflation was "transitory" — Yellen has noted the slippage in inflation expectations and residual slack in the labor market. These factors likely contributed to her lack of conviction. How widely shared her skepticism on an inflation pickup are will be notable as well, as that should strongly influence the pace of rate hikes.
Finally, discussion of a slower trend rate of productivity growth would be noteworthy. With slower productivity growth, the terminal funds rate may be lower while inflationary pressures and thus the speed of normalization would be faster. Yellen alluded to some debate on the FOMC regarding this issue, but so far Fed officials do not appear to have embraced this possibility. We think that could happen over time, which could materially change market expectations for the tightening cycle.
Barclays: We look to the minutes of the March FOMC meeting to provide context for the surprisingly dovish policy statement and downward revision to the median path of the dots. Several regional Federal Reserve Bank presidents have noted that the April meeting remains “live” for rate hikes if the data hold up. Since then, however, Chair Yellen indicated that she sees downside risks to the outlook stemming from abroad. “Live” need not equate to probable.
We expect the minutes to provide a clue as to whether the March policy statement, which again refrained from characterizing the balance of risks, represents a compromise between a more dovish Chair and relatively hawkish committee members. That is, we look once again to the minutes to judge the extent to which the committee remains sharply divided between those who would prefer rate hikes and those who would prefer for policy to remain on hold
RBS: The Fed Funds rate “dot plot” chart revealed that most FOMC members revised down their expectation for the appropriate path of the Fed Funds rate in March. But even if most members saw it appropriate to submit a more accommodative path for the Fed Funds rate, there does appear to be a rift of sorts between members over how strong the impact of a global growth slowdown will have on growth at home.
The March meeting minutes, which detail the discussion and debate at the meeting, may appear more balanced than Chair Yellen’s press conference as it will include the cautious views taken by many on the leadership and some of the more constructive outlooks taken by regional Fed Presidents.
But even so, given Chair Yellen’s dovish press conference in March reflected the view of the committee as a whole and most members felt it was appropriate to revise their dots lower, the core takeaways from the minutes may lean dovish.
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Fed's James Bullard will be the first to comment on the FOMC minutes Busy Bullard hits Bloomberg at 19.00 GMT Cleveland Fed's Loretta Mester (16.20GMT) and St Louis Fed's James Bullard (22.30GMT) are both scheduled to speak today but Bullard is also popping up on Bloomberg TV ahead of that appearance at 19.00GMT (if I've got my timezones right. St Louis Fed has tweeted 2pm CT). They're not sure whether he's on BBG's tv or radio though.
The FOMC minutes are out at 18.00 GMT and both of them are voters this year. Bullard is never shy to make the most of his soap box so that could add more volatility to any minutes induced moves.
Set your alarms people.
Preview: Did the FOMC have more clarity in March than they did in January? January's FOMC minutes were all about uncertainty. Did anything change in March?
The minutes from the FOMC can give further insight into the discussions at the meetings. Generally when we have a meeting with a presser, we've already had most of the juicy details so the minutes can be a bit of a dud.
That said we've already seen that there's possibly quite a battle going on between members over their viewed levels of risks.
The minutes from the January FOMC started the "worrying" ball rolling but the landscape was rather unclear then;
"Participants judged that the overall implication of these developments for the outlook for domestic economic activity was unclear, but they agreed that uncertainty had increased, and many saw these developments as increasing the downside risks to the outlook,".
By March those worries had increased enough to have the Fed lower their forecasts, and reduce the expected number of subsequent hikes. Adam did a great job of picking out the highlights and 5 things we learnt from the March FOMC
Today's minutes will hopefully shed some extra light on how deep those worries run. What is certain is that Yellen's latest comments have shown that the doves still trump the hawks. We saw a round of dollar bullishness after a spate of hawkish Fed speakers completely wiped out by her speech last week.
I see little coming for dollar bulls from the minutes today and the current price action probably reflects that. If the bulls do get something to chew on, it's hard to see it lasting in the face of this bearish sentiment. I wouldn't get too invested in the minutes, as I say, we had most of the news at the March press conference.
There's probably little value shorting the dollar here into the minutes, even if you were desperate for a trade in the first place. The only half decent trade I see is fading any mildly hawkish reactive pops in the dollar to the 110 level, if we're still in the ballpark by then.
A reminder that FOMC voter Loretta Mester is out in a few minutes and her comments may give the buck another injection of volatility.
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Sentiment on Fed running against April rate hike, minutes show Sentiment among Federal Reserve officials appeared to be running against an interest rate hike at their next meeting at the end of this month, according to minutes from the March meeting released Wednesday.
“Several” Fed officials, saying they backed a cautious approach to raising interest rates, “noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate,” the minutes said.
At the same time, “some” other Fed officials spoke in favor of an April rate hike.
Sentiment at the Fed could shift. The central bankers agreed that the data, rather than calendar dates, would determine the timing of the next rate hike.
The Fed’s next policy meeting is April 26-27. Before the minutes were released, traders saw only a very slim chance of a rate hike then and only see one rate hike all year, according to the CME FedWatch tool.
The minutes from the March 15-16 show broad concern about the fragile state of the financial markets and the global economy even though stock market volatility from the beginning of the year had settled down by the time of their meeting.
“Several participants expressed the view that the underlying factors abroad that led to a sharp, though temporary, deterioration in global financial conditions earlier this year had not been fully resolved and thus posed ongoing downside risks,” according the minutes, which were released after a three-week lag.
Since the meeting, Fed Chairwoman Janet Yellen gave a speech in New York stressing the need for the U.S. central bank to proceed cautiously on tightening monetary policy. At the same time, other Fed officials said they were open to considering an interest rate hike in April.
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Fed Debated April Rate Hike, FOMC Minutes Reveal Members of the Federal Open Market Committee (FOMC) discussed raising the rate in April, with some expressing concern that it might send the wrong message, the minutes from the March meeting revealed.
"Several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate," minutes from the Fed’s March 15-16 meeting said.
"In contrast, some other participants indicated that an increase" in the federal funds rate at the April 26-27 meeting "might well be warranted" if economic data matched expectations, according to the minutes said.
Even though the April rate hike is still unlikely, it puts more pressure on the June meeting.
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