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March 2021 FOMC Minutes Preview: Attention On Inflation And Taper Talk (1/2)

FED
The March 16-17 FOMC minutes are released at 1400ET today. Recall at that meeting, the FOMC raised growth and inflation forecasts / lowered unemployment projections, but reiterated they saw no rate hikes through 2023. While the initial market reaction to the meeting outcome was dovish, the subsequent session saw a reversal, with the Tsy curve steepening. Click on this link for MNI's review of the meeting.
  • Market attention on the minutes is likely to be varied, with topics including the discussion around the future path of inflation (beyond the expected 2021 base-effect jump) and the Fed's reaction function/tolerance for overshoot; views on broader employment metrics (not just the U-3 headline rate), and any mention on a potential asset purchase taper.
  • On the latter, in turn, attention is on what constitutes "substantial further progress" for such a taper.
  • We noted in our meeting review that Powell appeared somewhat testy when asked about possible asset purchase expansion/Operation Twist etc, and from his tone it seemed like the FOMC didn't discuss much in the way of supporting the long-end of the curve at that meeting - which was one potential trigger for the following day's long-end weakness. The minutes may confirm.
  • A few sell-side takes follow in our next note.
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