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4 things to watch for in the Fed Minutes
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Loading...1. A Balancing Act
The most notable change in the Fed’s January statement was its decision to not assess the balance of risks to the U.S. economy, after saying in December they were balanced. Usually, Fed officials state whether they believe the economy is more likely to perform above or below expectations—known as “upside” or “downside” risk in central bank jargon. In January, they punted, saying simply they were “closely monitoring” developments. That suggests there was great uncertainty among them about the economic outlook. The minutes could shed light on the internal debate.
2.The International Situation
By last December, it appeared the August bout of global market turmoil had eased, prompting Ms. Yellen to declare that, “downside risks from abroad have lessened since late summer.” When Ms. Yellen testified before Congress last week, her tone had changed. “Foreign economic developments, in particular, pose risks to U.S. economic growth,” she warned. Will this latest flare-up die down, as it did in the fall? Or are we in for something potentially more serious? The minutes could tell us Fed officials’ take.
3.Further On Down the Road
When the Fed raised interest rates in December, officials suggested they were leaning toward four rate increases of a quarter percentage point each through 2016. Economists and traders now see it more likely the Fed will raise rates less if at all this year. While the minutes will likely not explicitly tell us when—or if—the Fed will next raise rates, they might reveal which way Fed policy makers were leaning.
4.Negative Rates, Anyone?
Two days after the Fed’s January meeting, the Bank of Japan surprised the world by dropping interest rates into negative territory. Then last week, Sweden’s Riksbank’s moved further into negative territory, lowering its main interest rate to minus 0.5%. Since then, negative rates have been a hot topic in monetary circles. Ms. Yellen, facing a barrage of questions on the topic last week, told lawmakers the Fed was “taking a look at them.” The minutes will show whether Fed officials had any interest in discussing the option last month.
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