FOMC Minutes will find here
what investment banks expected before FOMC Minutes:
BofA: Given the market’s read on the March FOMC meeting as more hawkish than expected, the minutes will be poured over with some interest. Recall that the minutes historically give a platform against current policy to the (mostly nonvoting) hawks, and that risk continues in March. Our expectation is that the overall discussion among the voting members will be more in line with Fed Chair Janet Yellen’s most recent speech, which leaned dovish. Yellen made a strong case for still significant levels of slack in the economy. While many FOMC participants likely see continued slack for some time – recall that the FOMC’s estimate of the long-run unemployment rate edged lower to 5.4% in their updated March forecasts – the better-than-expected drop in the unemployment rate appears to have encouraged some Fed officials to shift up their funds rate projections slightly in the Fed’s “dot plot.” The discussion around those year-end interest rate forecasts will certainly get a lot of attention.
In addition to the extent of slack, another question facing the Fed is the persistence of low inflation. Some Fed officials have started to sound more concerned recently, and we will look to the discussion of inflation risks to assess whether the FOMC is starting to downplay the idea that transitory factors are holding inflation down. A third question is how to respond to financial stability concerns. A recent speech by Governor Stein reveals that even proponents of greater weight on this issue are unsure how to operationalize, so look for that conversation to continue. Finally, we will look for any discussion of operational details for the reverse repo facility, further talk of factors that might change the pace of tapering, potential updates to the exit strategy principles first laid out in June 2011, and possible communication refinements. Discussion over how long from the end of reinvestment to the first rate hike (in light of Yellen’s “six month” remark) or potential changes in the SEP – including acknowledgement of the limitations of the dot plot – would be notable.
CS: The minutes from the March FOMC meeting will be of interest to see if there was any debate about the potential length of a “considerable period,” as well as discussion about the idea of a lower equilibrium/terminal policy rate. Additionally, some Fed officials have grown increasingly vocal about asset bubble concerns, with statements that have gone so far as to suggest that tightening might be warranted before the output gap has closed and inflation returned to target in order to head off potential risks. The extent to which such scenarios receive mention and the specificity of any discussion may offer insight as to how widespread these concerns are.
BNPP: We expect the USD to regain its feet in the weeks ahead as improving US data puts renewed upside pressure on US yields. The data calendar is quiet this week, but today’s FOMC minutes release may provide some support. In her speech last week, Fed Chair Janet Yellen seemed keen to push back against the hawkish market interpretation of the March FOMC statement. However, the projections of the FOMC members for rate hikes did shift forward, and the minutes may contain some discussion of the reasons for this. As the chart below shows, the USD has tended to gain ground following the release of FOMC minutes, possibly a reflection of the greater visibility of the views of the more hawkish FOMC members relative to what gets incorporated in the FOMC statement.
In addition to the extent of slack, another question facing the Fed is the persistence of low inflation. Some Fed officials have started to sound more concerned recently, and we will look to the discussion of inflation risks to assess whether the FOMC is starting to downplay the idea that transitory factors are holding inflation down. A third question is how to respond to financial stability concerns. A recent speech by Governor Stein reveals that even proponents of greater weight on this issue are unsure how to operationalize, so look for that conversation to continue. Finally, we will look for any discussion of operational details for the reverse repo facility, further talk of factors that might change the pace of tapering, potential updates to the exit strategy principles first laid out in June 2011, and possible communication refinements. Discussion over how long from the end of reinvestment to the first rate hike (in light of Yellen’s “six month” remark) or potential changes in the SEP – including acknowledgement of the limitations of the dot plot – would be notable.
CS: The minutes from the March FOMC meeting will be of interest to see if there was any debate about the potential length of a “considerable period,” as well as discussion about the idea of a lower equilibrium/terminal policy rate. Additionally, some Fed officials have grown increasingly vocal about asset bubble concerns, with statements that have gone so far as to suggest that tightening might be warranted before the output gap has closed and inflation returned to target in order to head off potential risks. The extent to which such scenarios receive mention and the specificity of any discussion may offer insight as to how widespread these concerns are.
BNPP: We expect the USD to regain its feet in the weeks ahead as improving US data puts renewed upside pressure on US yields. The data calendar is quiet this week, but today’s FOMC minutes release may provide some support. In her speech last week, Fed Chair Janet Yellen seemed keen to push back against the hawkish market interpretation of the March FOMC statement. However, the projections of the FOMC members for rate hikes did shift forward, and the minutes may contain some discussion of the reasons for this. As the chart below shows, the USD has tended to gain ground following the release of FOMC minutes, possibly a reflection of the greater visibility of the views of the more hawkish FOMC members relative to what gets incorporated in the FOMC statement.
Barclays: We expect the minutes of the March FOMC meeting to provide color surrounding the discussion to move away from thresholds to qualitative guidance. While the FOMC statement indicated that this shift “does not indicate any change in the Committee’s policy intentions as set forth in its recent statements,” the median forecast of the fed funds rate rose by 25bp to 1.0% for 2015 and by 50bp to 2.25% at the end of 2016. We look for further discussion surrounding this increase, including whether it was prompted by a faster-than-expected decline in the unemployment rate as we believe.
Credit Agricole: The FOMC minutes likely focused on refining guidance and telegraphing the committee’s views without quantitative thresholds. The discussion on the outlook for tapering will likely continue to solidify expectations of a taper of USD10bn per meeting, although we will hear some arguing for a quicker wind-down of the programme. With the shift in forward guidance away from quantitative thresholds, there was likely discussion of how to refine guidance further and which labour market indicators FOMC members are focused on. The minutes are likely to highlight the views that formed the Summary of Economic Projections, and how the various FOMC members believe the Fed should telegraph its outlook on economic and labour market conditions that in turn influence its policy decisions. A range of Fed speakers have recently noted that beyond the unemployment rate, they are looking at the number of those who are unemployed long-term or working part-time for economic reasons, the number of workers wanting jobs relative to the number of job openings, the number of people voluntarily leaving their jobs, and the slow rise in wages. The minutes will also likely highlight the committee’s views on inflation. Recent Fed speakers have noted their concern about low inflation, but have highlighted expectations that inflation is bottoming and is likely to pick up this year as economic growth accelerates. There may be some discussion of adding additional press conferences for the Chairwoman after each meeting, as St Louis Fed’s Bullard alluded to in a speech this past week.
Credit Agricole: The FOMC minutes likely focused on refining guidance and telegraphing the committee’s views without quantitative thresholds. The discussion on the outlook for tapering will likely continue to solidify expectations of a taper of USD10bn per meeting, although we will hear some arguing for a quicker wind-down of the programme. With the shift in forward guidance away from quantitative thresholds, there was likely discussion of how to refine guidance further and which labour market indicators FOMC members are focused on. The minutes are likely to highlight the views that formed the Summary of Economic Projections, and how the various FOMC members believe the Fed should telegraph its outlook on economic and labour market conditions that in turn influence its policy decisions. A range of Fed speakers have recently noted that beyond the unemployment rate, they are looking at the number of those who are unemployed long-term or working part-time for economic reasons, the number of workers wanting jobs relative to the number of job openings, the number of people voluntarily leaving their jobs, and the slow rise in wages. The minutes will also likely highlight the committee’s views on inflation. Recent Fed speakers have noted their concern about low inflation, but have highlighted expectations that inflation is bottoming and is likely to pick up this year as economic growth accelerates. There may be some discussion of adding additional press conferences for the Chairwoman after each meeting, as St Louis Fed’s Bullard alluded to in a speech this past week.
and after the FOMC Minutes, according to Mattias Bruér:
"According to the FOMC minutes, several participants noted that the increase in the median projections of the fed funds rate overstated the shift - so while the dots were hawkish indeed, the FOMC did not intend to send such a signal. Meanwhile there was a clear divergence of views over how much slack there is in the labor market. The market was taking the minutes as dovish with the Dow up around 80 points half an hour after the release.
BLAME WEATHER: Most participants noted that unusually severe winter weather had held down economic activity during the early months of the year. Business contacts in various parts of the country reported a number of weather-induced disruptions, including reduced manufacturing activity due to lost workdays, interruptions to supply chains of inputs and delivery of final products, and lower-than-expected retail sales. Participants expected economic activity to pick up as the weather-related disruptions to spending and production dissipated.
WHAT IS THE TREND? Participants noted further improvement, on balance, in labor market conditions. The unemployment rate had moved down in recent months, as had broader measures of unemployment and underemployment. Other labor market indicators, such as payrolls and hiring and quit rates, while not all showing the same extent of improvement, also pointed to ongoing gains in labor markets. Going forward, participants continued to expect a gradual decline in the unemployment rate over the medium term, with judgments differing somewhat across participants about the likely pace of the decline. It was also noted that uncertainty about the trend rate of productivity growth was making it difficult to ascertain the rate of real GDP growth that would be associated with progress in reducing the unemployment rate.
CHINA IS A RISK: Several participants pointed to international developments that bear watching. It was suggested that slower growth in China had likely already put some downward pressure on world commodity prices, and a couple of participants observed that a larger-than-expected slowdown in economic growth in China could have adverse implications for global economic growth. In addition, it was noted that events in Ukraine were likely to have little direct effect on the U.S. economic outlook but might have negative implications for global growth if they escalated and led to a protracted period of geopolitical tensions in that region.
WHY THE NEUTRAL RATE IS LOWER NOW: Participants observed that a number of factors were likely to have contributed to a persistent decline in the level of interest rates consistent with attaining and maintaining the Committee's objectives. In particular, participants cited higher precautionary savings by U.S. households following the financial crisis, higher global levels of savings, demographic changes, slower growth in potential output, and continued restraint on the availability of credit."
"According to the FOMC minutes, several participants noted that the increase in the median projections of the fed funds rate overstated the shift - so while the dots were hawkish indeed, the FOMC did not intend to send such a signal. Meanwhile there was a clear divergence of views over how much slack there is in the labor market. The market was taking the minutes as dovish with the Dow up around 80 points half an hour after the release.
BLAME WEATHER: Most participants noted that unusually severe winter weather had held down economic activity during the early months of the year. Business contacts in various parts of the country reported a number of weather-induced disruptions, including reduced manufacturing activity due to lost workdays, interruptions to supply chains of inputs and delivery of final products, and lower-than-expected retail sales. Participants expected economic activity to pick up as the weather-related disruptions to spending and production dissipated.
WHAT IS THE TREND? Participants noted further improvement, on balance, in labor market conditions. The unemployment rate had moved down in recent months, as had broader measures of unemployment and underemployment. Other labor market indicators, such as payrolls and hiring and quit rates, while not all showing the same extent of improvement, also pointed to ongoing gains in labor markets. Going forward, participants continued to expect a gradual decline in the unemployment rate over the medium term, with judgments differing somewhat across participants about the likely pace of the decline. It was also noted that uncertainty about the trend rate of productivity growth was making it difficult to ascertain the rate of real GDP growth that would be associated with progress in reducing the unemployment rate.
CHINA IS A RISK: Several participants pointed to international developments that bear watching. It was suggested that slower growth in China had likely already put some downward pressure on world commodity prices, and a couple of participants observed that a larger-than-expected slowdown in economic growth in China could have adverse implications for global economic growth. In addition, it was noted that events in Ukraine were likely to have little direct effect on the U.S. economic outlook but might have negative implications for global growth if they escalated and led to a protracted period of geopolitical tensions in that region.
WHY THE NEUTRAL RATE IS LOWER NOW: Participants observed that a number of factors were likely to have contributed to a persistent decline in the level of interest rates consistent with attaining and maintaining the Committee's objectives. In particular, participants cited higher precautionary savings by U.S. households following the financial crisis, higher global levels of savings, demographic changes, slower growth in potential output, and continued restraint on the availability of credit."
First transaction was opened and closed on the same day on Tuesday. It was a long position on the EUR/USD market. The resulting revenue is 53 pips.
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| chart 1. EUR/USD M15, 2014-04-08 |
The second transaction, more interesting. This long position too in gold, trade still open with the target to $ 1420. And it is my recommendation at the moment. With stop loss slightly below the lows of the day.
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| chart 2. Gold M5, 2014-04-09 |
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