FOMC Minutes: “Most” Back Rate Hikes, “Several” Fear Low Inflation, Financial Stability Risks
by Tyler Durden
ZeroHedge.com
Wed, 01/03/2018
Given the major reshuffle in the voters on the FOMC, we suspect today’s minutes will be shrugged off as ‘old news’, but the fact that gold prices have risen incessantly since Yellen raised rates at her last meeting suggests some language will be needed to tamp down that anti-dollar view.
Hopes that the Minutes would clarify the confusion left by The Fed’s growth outlook raise and inflation leave and increased its rate trajectory to 7 hikes (from 6), were dashed.
Bloomberg’s Cameron Crise notes that while it’s true that some notable doves are booted out of the voting rotation this year, keep an eye on whether an increasing number of meeting participants will require inflation measures to show up more forcefully before sanctioning another rate hike. If “several,” “a number” or “many” committee members express some unease, then we could be looking at a properly painful squeeze of Treasury shorts.
*MOST FED OFFICIALS BACKED CONTINUED GRADUAL RATE HIKES
*FED: FASTER INFLATION FROM TAX CUT AMONG REASONS TO SPEED HIKES
*SEVERAL FED OFFICIALS CONCERNED BY LOW INFLATION EXPECTATIONS
*COUPLE OF FED OFFICIALS CONCERNED BY FINANCIAL STABILITY RISKS
*FED OFFICIALS GENERALLY AGREED FLATTER YIELD CURVE NOT UNUSUAL
Following are selected excerpts from the FOMC meeting minutes that concluded on Dec. 13:
“Participants discussed several risks that, if realized, could necessitate a steeper path of increases in the target range; these risks included the possibility that inflation pressures could build unduly if output expanded well beyond its maximum sustainable level, perhaps owing to fiscal stimulus or accommodative financial market conditions.”
“Many participants expected the proposed cuts in personal taxes to provide some boost to consumer spending.”
“Many participants judged that the proposed changes in business taxes, if enacted, would likely provide a modest boost to capital spending, although the magnitude of the effects was uncertain.”
“Participants also discussed risks that could lead to a flatter trajectory for the federal funds rate in the medium term, including a failure of actual or expected inflation to move up to the Committee’s 2 percent objective.”
Meeting participants “generally agreed that the current degree of flatness of the yield curve was not unusual by historical standards.”
“In light of elevated asset valuations and low financial market volatility, a couple of participants expressed concern that the persistence of highly accommodative financial conditions could, over time, pose risks to financial stability.”
The Rest…HERE
