With a dumping dollar and collapsing yield curve since November’s FOMC, all eyes are on the Minutes for any signals of The Fed hawkishly ignoring inflation concerns but instead a few Fed officials opposed near-term hikes (on the basis of weak inflation). Furthermore, several Fed officials warned of the potential for bubbles, “in light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances.”
Bloomberg’s Brendan Murray highlights the key aspects of The Fed Minutes
Consistent with their expectation that a gradual removal of monetary policy accommodation would be appropriate, many participants thought that another increase in the target range for the federal funds rate was likely to be warranted in the near term if incoming information left the medium-term outlook broadly unchanged. Nearly all participants reaffirmed the view that a gradual approach to increasing the target range was likely to promote the Committee’s objectives of maximum employment and price stability.
A few other participants thought that additional policy firming should be deferred until incoming information confirmed that inflation was clearly on a path toward the Committee’s symmetric 2 percent objective.
Several participants indicated that their decision about whether to increase the target range in the near term would depend importantly on whether the upcoming economic data boosted their confidence that inflation was headed toward the Committee’s objective. A few participants cautioned that further increases in the target range for the federal funds rate while inflation remained persistently below 2 percent could unduly depress inflation expectations or lead the public to question the Committee’s commitment to its longer-run inflation objective.
In light of elevated asset valuations and low financial market volatility, several participants expressed concerns about a potential buildup of financial imbalances. They worried that a sharp reversal in asset prices could have damaging effects on the economy.
This post was published at Zero Hedge on Nov 22, 2017.