Sept. FOMC Minutes Preview: Focus On Divisions (1/2)

The minutes for the Sept FOMC meeting (released 1400ET/1900BST), at which the Fed adopted new statement language incorporating its new flexible average inflation targeting approach, will be pored over for a few main insights:

• How divided were members over the new forward guidance language? Of course we got two dissenting votes (Kaplan and Kashkari) but it is very possible/likely there were other non-voting participants who had their qualms. BMO says "any sense as to a broader wavering regarding the new outcome-based forward guidance will be salient...The more detailed and widespread any disagreement may be, the weaker that anchoring becomes, running the risk that potential normalization could get factored in earlier than Powell may otherwise desire, thereby prematurely tightening financial conditions. As such, we'll be watching the 3- to 5-year sector of the Treasury curve to gauge the market reaction."
• Any more specificity on what the new fwd guidance language means? The minutes are likely to be vague on this; as NatWest points out, "it seems unlikely that the Fed would box itself in now by tilting the discussion in the minutes of what exactly a "moderate" overshoot means one way or the other but could provide some useful insights." Barclays also looking for "how long members were willing to overshoot, and the importance of measures of inflation expectations play in making these assessments"; Deutsche also looking for specifics on inflation conditions that could trigger rate hikes.