January Minutes: FOMC Is In No Rush To Decide (1/2)

A few observations from the January FOMC minutes:

• The main thing is that the Committee doesn't appear to be in any rush to make big decisions. That applies to both the decision to cut rates for the first time (which if it wasn't clear before, is perfectly clearly not going to be in March) and on QT tapering ("many participants suggested that it would be appropriate to begin in-depth discussions of balance sheet issues at the Committee's next meeting to guide an eventual decision to slow the pace of runoff").
• For the rate cut outlook, the major headline that emerged upon release of the minutes was that “most” participants noted the risk of moving “too quickly to ease the stance of policy", while just a "couple" predominantly saw risks of maintaining policy too tight for too long.
• Most of the rest of the minutes were basically in line with expectations that the FOMC would provide a cautious message, particularly since they were probably massaged between the meeting and the final release, reflecting the strong NFPs and CPI data.
• Overall the message was consistent with the statement changes and the Powell's post-press conference commentary: the benchmark rate was seen “likely at its peak for this tightening cycle” (vs the previous minutes which noted they were likely "at or near") but the FOMC would not ease “until they had gained greater confidence that inflation was moving sustainably toward 2 percent."
• On financial conditions: risks that "financial conditions could remain restrictive for too long" were noted, but participants generally appeared more concerned that conditions could be becoming too loose: "several participants mentioned the risk that financial conditions were or could become less restrictive than appropriate". The latter risk has faded somewhat post-meeting as rate cuts have been priced out, but the inclusion of this language suggests that loosening conditions may have been on members' minds when pushing back on easing expectations at the meeting. That could be instructive when considering financial market developments going into future meetings.