Given the deluge of Fedspeak the market has been subjected to over the past three weeks, the October Fed minutes likely won’t make any waves on Wednesday.
Jerome Powell’s policy of holding press conferences after every meeting pretty much by definition diminishes the value of FOMC minutes from non-SEP meetings, and the message from policymakers has been close to unanimous since last month’s pow wow: The Fed intends to stay on hold for the time being and hopes this year’s dovish lean, trio of rate cuts and U-turn on balance sheet policy is enough to bolster the decelerating economy.
“It will be clear that the majority of Fed officials think that policy is supportive”, BofA said Friday.
Still, market participants were keen to hear any details around what factors would prompt “a material reassessment” of the outlook, which Powell said would be required for the committee to move going forward.
The minutes show Fed officials saw rates as “well calibrated” after the October cut, although “many viewed the downside risks as elevated”.
With a third insurance cut on the books, “most” officials saw policy as “appropriate” unless there was a “material change” in the environment.
A couple of officials who backed last month’s cut saw it as a close call, and, of course, some saw no need for another cut. Several officials voiced concerns that inflation could fall further and when it comes to alleviating short-term funding pressure, “many” officials think the idea of a standing repo facility is “potentially useful”.
Read more: Analyst Who Called Funding Squeeze Not Blown Away By Fed’s New Repo Schedule
After the minutes, futures showed the next Fed move will be a cut. It’s fully priced for July.
That’s in line with what most were expecting. “We think [the minutes] will show the Fed is through with providing insurance cuts although retains an easing bias owing to residual uncertainties”, Barclays said Sunday.
Powell of course met with Donald Trump at the White House on Monday, and according to the Fed’s account, he did not deviate from what he told Congress last week. Trump called the meeting “cordial”.
The president is pushing harder than ever for the institution of negative rates in the US, an idea viewed by anyone who isn’t called “Donald Trump” as a complete nonstarter. Powell called it “certainly not appropriate” during remarks to lawmakers last week.
