FOMC Minutes Show “Divided” Fed Fearful Of High Asset Prices, Low Inflation

Wednesday, July 5, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Jul 5, 2017

Having hiked in June amid gravely disappointing macro-economic data, all eyes are now on the minutes for inflation (weakness blamed on “idiosyncratic factors”), labor market (concerns about “sustained employment undershoot”), balance sheet normalization (Fed “divided” over when to start), and market valuation concerns (“equity market high on standard metrics”). Rate hike odds for Sept (22%) and Dec (56%) were rising into the release.

Additional headlines…

*FED OFFICIALS DIVIDED OVER WHEN TO START BALANCE-SHEET RUNOFF
*FED OFFICIALS REPEATED SUPPORT FOR GRADUAL INTEREST-RATE HIKES
*A FEW FED OFFICIALS SAW EQUITY PRICES HIGH ON STANDARD METRICS
*FED OFFICIALS NOTED FINANCIAL CONDITIONS EASED DESPITE HIKES
*A FEW OFFICIALS SAW LOW VOLATILITY STOKING RISKS TO STABILITY
*MOST FED OFFICIALS BLAMED SOFT PRICES ON IDIOSYNCRATIC FACTORS
*FED DEBATED PROS, CONS OF SUSTAINED UNEMPLOYMENT UNDERSHOOT
Some of the key highlights from the minutes, first on the timing of the next rate hike, where the FOMC appears split:

“Participants expressed a range of views about the appropriate timing of a change in reinvestment policy. Several preferred to announce a start to the process within a couple of months; in support of this approach, it was noted that the Committee’s communications had helped prepare the public for such a step. However, some others emphasized that deferring the decision until later in the year would permit additional time to assess the outlook for economic activity and inflation.”

“A few of these participants also suggested that a near-term change to reinvestment policy could be misinterpreted as signifying that the Committee had shifted toward a less gradual approach to overall policy normalization.”

The Rest…HERE

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