FED Minutes: What to Expect?

It seems investors have gone ahead and have forgotten the December FED meeting, especially after two weeks later Powell with his comments admitted that the central bank is ready for rapid changes in monetary policy.

But today, the Fed Minutes, which will take place at 21:00, are not to be underestimated. The report can provide us with important information and guidance on how unanimous the members of the Federal Open Market Committee were at their meeting on December 18 and 19. Then the basic interest rate was raised and a forecast for further interest rises was projected, despite the serious downturns in the markets and the pressure Trump had been pushing over the Fed. Bank of America's Michelle Meyer says: "These minutes are also important because they will give us an idea of ​​what's going on inside the FOMC." The issue of interest rates is subject to a decision by the whole Committee, and to find out whether they are united or divided in their views is essential. For five things, investors will look through the minutes.

Why a gradual rise in interest rates?

While investors were fully expecting interest rates to rise, those who watch the shorter things happening at the FOMC will see whether the Fed's mood will turn to a more privileged position. The Fed "got" their rhetoric in a proper way to reason exactly with their view of "gradual raising of interest rates".

"I'm sure there was a further discussion about this" gradual "situation." - says Sarah House, senior economist at Wells Fargo & Co. "We will see how unanimous they have been to this statement or how close they have been to a common solution."

Balancing risks

The Committee maintained that the risks to the economy were "relatively balanced". Fed representatives added that they will continue to watch the world economy carefully. However, they may have assumed that there are serious risks to drag the economy down. Many market participants believe that there are similar risks.

Again, any details about this decision to judge the economic situation will throw extra light. In addition, Jennifer Lee, senior economist at BMO Capital Markets, said she hopes to get more information about the risks themselves, something more specific that the Fed's representatives see as a serious threat. For example, how do they worry about the weaker growth in China and Europe and what will be the consequences of the war?

Financial conditions

Economists are also awaiting understanding the Fed's view of tightening financial conditions, which has led to substantial depreciation of stocks.

"I will be curious to understand the Fed's interpretation of recent market events, and whether there was any concern about whether they should change their minds." - says Carl Tannenbaum, chief economist at Northern Trust Corp. in Chicago.

The decision to raise interest rates was unanimous, but under the surface of this decision may also be contradictions brought about by the change in market conditions.

The Balance sheet

Economists will also welcome any signal from the Fed's representatives about the central bank's plans for the balance. Powell's comments on Jan. 4 secured the financial markets, in particular, that the Fed is ready for flexible changes to the Fed's balance sheet. He is currently "lightening" with $ 50 billion each month. Previously, however, on December 19, Powell mentioned that the balance cut was put into autopilot mode.

Minutes would clarify whether the Fed's representatives had not considered a change in their position.

Market participants are hungry for signals from the Fed for their long-term plans. To keep the central bank in control of short-term interest rates or to switch back to a system based on a much clearer balance.

Source: Bloomberg Finance L.P.

Graphs: Used with permission of Bloomberg Finance L.P.

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