September Fed Minutes: Highlights

Ok, who’s excited about the Fed Minutes? Raise your hands!

Obviously, the September minutes will be parsed for clues as to what the committee was thinking in terms of staying the course for December despite lackluster inflation.

Also key – or at least to our mind – is if there’s any indication sticking to the near-term rate path was in any way motivated by concerns about financial stability. So do they really think inflation is being held down by “transitory” factors? Or is that just an excuse to obscure the fact that they know they need to hike in order to head off further risks to stability created by keeping policy too accommodative for too long?


It would appear, from the just released minutes, that inflation was all anyone wanted to talk about.

Here are the highlights via Bloomberg:

  • All participants thought it would be appropriate for the Committee to maintain the current target range for the federal funds rate
  • Many participants expressed concern that the low inflation readings this year might reflect not only transitory factors
  • Overall, the available information suggested that, although the storms would likely affect the quarterly pattern of changes in real GDP at least through the second half of the year:
    • Members judged that storm-related disruptions and rebuilding would affect economic activity in the near term, but past experience suggested that the hurricanes were unlikely to materially alter the course of the national economy over the medium term
    • Higher prices for gasoline and some other items in the aftermath of the hurricanes would likely boost inflation temporarily
    • Interpreting the next few inflation reports would likely be complicated by the temporary run-up in energy costs and in the prices of other items affected by storm-related disruptions and rebuilding
  • A few participants thought that additional increases in the federal funds rate should be deferred until incoming information confirmed that the low readings on inflation this year were not likely to persist
  • It was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted
  • All agreed that they would closely monitor and assess incoming data before making any further adjustment to the federal funds rate
  • Many participants continued to believe that the cyclical pressures associated with a tightening labor market or an economy operating above its potential were likely to show through to higher inflation over the medium term
  • Some participants discussed the possibility that secular trends, such as the influence of technological innovations on competition and business pricing, also might have been muting inflationary pressures and could be intensifying
  • It was also noted that the persistence of low inflation might result in the federal funds rate staying uncomfortably close to its effective lower bound
  • Many underscored that the reduction in securities holdings would be gradual and that financial market participants appeared to have a clear understanding of the Committee’s planned approach for a gradual normalization of the size of the Federal Reserve’s balance sheet
  • Most participants had not assumed enactment of a fiscal stimulus package in their economic projections or had marked down the expected magnitude of any stimulus

The knee-jerk reaction is some semblance of dovish (but just barely):


Full release:

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