With everything red since the October 28th "hawkish" FOMC meeting - which greenlit a December rate hike and convinced the world that everything is awesome in America (well why else would The 'smart' Fed raise rates?) - today's minutes suggest an FOMC that is perhaps not quite as "whatever it takes" committed to a December liftoff...
- *FOMC MEMBERS WANTED TO CONVEY DEC. LIFTOFF MAY BE APPROPRIATE
- *SOME FED OFFICIALS: UNLIKELY LIFTOFF CONDITIONS MET BY DEC.
- *COUPLE ON FOMC CONCERNED WORDING CHANGE TOO STRONG A DEC SIGNAL
But bear in mind there is a lot of data between now and December 16th (including payrolls) and what if stocks drop?
And not everyone is gung-ho...
- *FOMC MEMBERS OPEN TO DEC. LIFTOFF BARRING UNANTICIPATED SHOCKS
- *MOST FED OFFICIALS SAID LIFTOFF CONDITIONS COULD BE MET BY DEC.
- *COUPLE ON FOMC CONCERNED WORDING CHANGE TOO STRONG A DEC SIGNAL
- *ALMOST ALL ON FOMC AGREED ON NEED TO ASSESS LABOR MKT STRENGTH
- *FED OFFICIALS SAID ACTUAL LIFTOFF DECISION TO DEPEND ON DATA
- *SEVERAL FED OFFICIALS SAID DOWNSIDE RISKS TO OUTLOOK REMAINED
Pre-Minutes: 68% rate-hike odds, S&P Futs 2064, 10Y 2.28%, EURUSD 1.0640, Gold $1070, WTI $40.45
Bear in mind that The Fed's new man from Dallas Kaplan hinted earlier:
- *KAPLAN: ZERO-RATE FOR TOO LONG CAUSES IMBALANCES, DISTORTIONS
- *KAPLAN: FIRST RATE INCREASE HAS BECOME `PSYCHOLOGICAL BARRIER'
Everything red post-FOMC... even stocks (for now) as commodities get crushed...
[7]
As rate hike odd soared...
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Despite weakness in macro and micro data...
[9]
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Key sections:
Hike in December... unless the S&P500, er data changes.
Some participants thought that the conditions for beginning the policy normalization process had already been met. Most participants anticipated that, based on their assessment of the current economic situ-ation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period. Some others, however, judged it unlikely that the information available by the December meeting would warrant raising the target range for the federal funds rate at that meeting.
The Fed's 102,345th mandate: Chinese unemployment, and of course risk management, i.e., the S&P 500:
Several participants indicated that, despite lessening concerns about the implications of recent global economic and financial developments for domestic economic ac-tivity and inflation, appreciable downside risks to the outlook remained. They were concerned about a poten-tial loss of momentum in the economy and the associ-ated possibility that inflation might fail to increase as ex-pected. Such concerns might suggest that the initiation of the normalization process may not yet be warranted. They also noted uncertainty about whether economic growth was robust enough to withstand potential adverse shocks, given the limited ability of monetary policy to offset such shocks when the federal funds rate is near its effective lower bound, and concern that the begin-ning of policy normalization might be associated with an unwarranted tightening of financial conditions. They believed that in these circumstances, risk-management considerations called for a cautious approach. They judged it appropriate to wait for additional information providing evidence of further improvement in the labor market and increasing their confidence that inflation was on a path to return to 2 percent over the medium term before raising the target range for the federal funds rate. In addition, a couple of participants cited concerns that a premature tightening might damage the credibility of the Committee’s inflation objective if inflation stayed be-low 2 percent for a prolonged period.
And the Fed's latest forward guidance: the inclusion of the language that it "may very well become appropriate" to hike in December... barring no "unanticipated shocks"
In its postmeeting statement, rather than framing its near-term policy path in terms of how long to maintain the current target range, the Committee decided to indi-cate that, in determining whether it would be appropriate to raise the target range at its next meeting, it would assess both realized and expected progress toward its objectives of maximum employment and 2 percent in-flation. Members emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook and that incoming data support the expectation that labor market conditions will continue to improve and that inflation will return to the Committee’s 2 percent objective over the medium term.
Full Statement below (link [10])
Charts: Bloomberg