The minutes from the March FOMC meeting did not shine much new light on the committee’s thinking relative to what was revealed in the statement, projection materials, and press conference. This should not come as a surprise; the Fed’s quarterly meetings with press conferences contain a lot of information and there is a fairly low probability that the subsequent minutes will contain much that is new. Nevertheless, the minutes reinforce the message sent by the committee on March 18. Namely, that enough progress has been made to warrant the removal of forward guidance, a large majority of FOMC participants see rate hikes coming in late 2015 (e.g., September to December), and the subsequent pace of rate hikes is likely to be gradual.The minutes note that “several” FOMC participants were anticipating raising rates in June, while a “couple” preferred to wait until 2016.”several” refers to three to four participants while a “couple” refers to two. This means that the remainder prefer to take action in the September to December period, assuming that the outlook evolves in line with their expectations. The minutes and updated projections indicate that half of FOMC participants lowered their estimate of NAIRU at the March meeting, with more than half of the committee estimating the long-run rate of unemployment at 5.0-5.1%. This means that labor markets have more ground to cover before policymakers see their goals as being met. “We view September as the likely timing for the first rate hike, with some probability that the committee waits until December should core inflation be dragged lower by falling import prices. Our baseline expectation is for the federal funds rate to be hiked twice in 2015 and finish the year at the target of 50-75bp”, said Barclays in a report on Thursday.
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