Summing it all up...
FOMC summed up: We have no clue what we are doing. We missed the 1st qtr slowdown, but it's all uphill from here....hopefully
— Stalingrad & Poorski (@Stalingrad_Poor) May 20, 2015 [5]
With all eyes focused on the minutes - as markets play "tightening chicken" with The Fed with stocks flat, gold flat, and short-end bonds flat since the April FOMC - any hint that, despite the terrible data, The Fed has to move, will surely be met with horror...
- FED OFFICIALS GAVE NUMBER OF REASONS WHY 1Q WEAKNESS TRANSITORY
- MANY FED OFFICIALS SAW JUNE RATE RISE AS UNLIKELY
- FED OFFICIALS SAW DOLLAR EXERTING DRAG ON GROWTH 'FOR A TIME'
- FED OFFICIALS HIGHLIGHTED RISKS OF VOLATILITY AFTER LIFTOFF
And yet:
- FED OFFICIALS GENERALLY DIDN'T RULE OUT RATE RISE AT JUNE FOMC
So, once again, just enough there for both bulls and bears from doves and hawks as it becomes increasingly clear that The Fed is cornered.
Pre-FOMC Minutes: S&P Futs 2123, 10Y 2.24%, EUR 1.1100, Gold $1210
Since the April 29th FOMC meeting, Trannies are ugly but the rest are holding modest gains...
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Gold is unchanged, Silver and Copper higher...
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And while the short-end is flatish, the long-end of the bond curve has been hammered...
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Here are the minutes highlights:
June. June. June.
A few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook to lead the Committee to judge that its conditions for beginning policy firming had been met. Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility. Participants discussed the merits of providing an explicit indication, in postmeeting statements released prior to the commencement of policy firming, that the target range for the federal funds rate would likely be raised in the near term. However, most participants felt that the timing of the first increase in the target range for the fed-eral funds rate would appropriately be determined on a meeting-by-meeting basis and would depend on the evo-lution of economic conditions and the outlook. In keeping with this data-dependent approach, some participants further suggested that the postmeeting statement’s description of the economic situation and outlook, and of progress toward the Committee’s goals, provided the appropriate means by which the Committee could help the public assess the likely timing of the initial increase in the target range for the federal funds rate.
The Fed is clearly terrified of bond market volatility. So much so, it finally admits we were right all along, and invokes the dreaded "high-frequency trader" phrase for the first time in FOMC history
In their discussion of financial market developments and financial stability issues, policymakers highlighted possi-ble risks related to the low level of term premiums. Some participants noted the possibility that, at the time when the Committee decides to begin policy firming, term premiums could rise sharply—in a manner similar to the increase observed in the spring and summer of 2013—which might drive longer-term interest rates higher. In this connection, it was suggested that the tendency for bond prices to exhibit volatility may be greater than it had been in the past, in view of the increased role of high-frequency traders, decreased inventories of bonds held by broker-dealers, and elevated assets of bond funds.
Good luck controlling not only that volatility, but the only mandate the Fed has had since 2009: the S&P 500.
The Minutes word cloud:
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Full minutes below:
