Minutes (1/3)

The Minutes to the March 21-22 FOMC meeting (our review of which is here) are published Wednesday at 1400ET/1900UK. Apart from the usual focus on how the FOMC saw the macro state of play at the time of the February meeting, a few areas of interest to watch for:

• How many hikes is bank stress worth? Along with the delivered 25bp hike and the Dot Plot indicating a terminal rate in another 25bp at 5.00-5.25%, there was an implication that the Fed could have gone further on either the peak rate signal (perhaps to 5.25-5.50%) or the hike itself (to 50bp), but played it safe given banking sector turmoil at the time. Chair Powell said in the press conference that tighter bank conditions were "the equivalent of a rate hike, or perhaps more than that".
• How many participants supported a 25bp hike / 50bp / unch? This is our Instant Answers question and while we would expect the vast majority of participants to have backed 25bp, we suspect there could be a few who thought a pause would be more prudent in order to better gauge the impact of banking sector turmoil. Indeed Powell revealed the FOMC had considered pausing in the days before the meeting before building "strong consensus" on 25bp.
• What is the FOMC looking for in order to pause on rates? At the February press conference, Chair Powell noted that the meeting minutes would include further detail on the FOMC's discussion on criteria to pause. That didn't materialize, with the record probably scrubbed after strong data put 50bp on the table for the March meeting and the Fed not wanting to send mixed messages. Now that the FOMC is just one 25bp hike away from the median terminal rate, we expect some more color on participants' pause criteria.
• Anything more on the rate guidance change? The new guidance no longer says "ongoing increases” "will" be appropriate, merely that "some additional policy firming may" be appropriate. Powell later clarified that “firming” was intended to mean rate hikes (as opposed to balance sheet policy), and that the emphasis should be placed on “may” and “some” rather than ongoing. This change suggested a compromise on behalf of FOMC doves who think they may have reached terminal rates already - a hawkish risk is that the minutes play down this interpretation (especially given that 17 of 18 participants saw another 25bp hike per the Dot Plot).