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MNI: 5 Things: FOMC Minutes to Confirm Inflation Progress
By Jean Yung
WASHINGTON (MNI) - The Federal Open Market Committee's policy statement at
the close of its May gathering offered little new information on the projected
future path of U.S. interest rate hikes, but the minutes of the meeting may give
more color on the latest discussion around inflation. The following are five
things to look for:
-- Any signal regarding a widely expected interest rate increase at the
upcoming June FOMC meeting, as well as whether the committee will revise up its
2018 rate forecast to four hikes from three in the March Survey of Economic
Projections. Markets have already priced in another 60 basis points in Fed hikes
by year-end, according to CME Group. However, further out, markets are
underpriced relative to the Fed's outlook but seem to be positioning for a more
hawkish shift ahead of June.
-- Details of the discussion around changes to the inflation language in
the statement, especially the committee's emphasis on the "symmetric" target as
well as the decision to drop the phrase that the FOMC is "monitoring inflation
closely." The minutes should confirm what many policymakers have said publicly
since the May meeting, that inflation is rising toward their target and that
they do not intend to overreact to a modest overshoot of inflation. The minutes
could shed light on how much and for how long participants would tolerate
above-target inflation.
-- Further discussion over financial market conditions, including the
implications of an inverted yield curve, higher equities and U.S. dollar.
Policymakers in December and January noted it would be important to continue to
monitor the effects of policy tightening on the slope of the yield curve due to
the strong association between past yield curve inversions foreshadowing an
economic slowdown. As the Fed continues to raise rates, pushing short-term
yields higher, the risk of an inversion could grow.
-- Official thinking regarding changes to the FOMC's forward guidance as
monetary policy approaches a neutral stance from being accommodative. Incoming
New York Fed President John Williams, among others, have indicated that the
statement language will need to change as policy hits that key turning point,
perhaps in a more fundamental way than tweaks to phrasing.
-- Ongoing debate over the longer run policy framework, including new ideas
on inflation targeting and balance sheet policy.
--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com
[TOPICS: MMUFE$,M$U$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.