Analysts Eye Financial Conditions Impact (3/3)

Some sell-side analysts' views on what to watch for in the November FOMC minutes:

• Deutsche: "Market participants will look to glean from the minutes the degree of tightening Fed officials perceived at the time and the persistence of this tightening needed to maintain the "sufficiently restrictive" stance of policy they desire. Indeed, as Chair Powell recently noted, the jury was still out as to whether the Committee was confident they had reached the pinnacle of the current tightening cycle – even as communications have begun to slowly transition the focus toward how long the Fed intends to hold the fed funds rate at current levels. While it is possible we may see some preliminary discussions around the topic of "how long" to keep the policy rate elevated, it is likely too early given that Chair Powell has made clear that "how high" remains an open question."
• TD: "The FOMC's Nov policy decision marked the first time that the Fed paused for two consecutive meetings. Powell's post-meeting remarks were also interpreted as dovish, with recent soft data supporting the view that the Committee is likely done with rate hikes. However, we expect the minutes to convey a more balanced message, with an FOMC that's not ready to claim victory yet."
• BMO FICC: "the greatest insight one should expect from the FOMC minutes comes in the form of how responsive the Fed anticipates being in response to evolving financial conditions. The Fed skipped a November hike based largely on the ~100 spike in 10-year yields that led to tighter financial conditions. Now that 10-year yields have moved back below 4.50%, should one assume that another quarter-point hike is back on the table? That’s what investors are hoping to glean from the minutes; whether such insight is on offer is an entirely different question – on that we expect resolves in disappointment. There is a compelling argument to be made that tighter financial conditions corresponded with the point in the cycle at which support on the Committee for further hikes was already waning; implying the Treasury selloff came at an opportune moment for those advocating exercising more caution."
• ING: "likely to be less market-moving than usual, given the post-meeting softness in data and flurry of Fed speak.|