The FOMC minutes from the uberdovish March meeting were just released. Here are the highlights:
- SEVERAL ON FOMC ARGUED AGAINST APRIL HIKE AS SOME FAVORED IT
- PARTICIPANTS HAD ‘RANGE OF VIEWS’ ON APRIL HIKE
- MOST PARTCPNTS AGREED W/RT HOLD; COUPLE WANTED HIKE
- MANY ON FOMC SAW BIGGER GLOBAL RISKS WARRANTING POLICY CAUTION
- SEVERAL NOTED CAUTION WOULD BE PRUDENT IN APRIL DECISN
- FOMC SAW NEXT MOVE BASED ON DATA ASSESSMENT, NOT CALENDAR DATE
- MANY ON FOMC SAID PRUDENT TO WAIT BEFORE NEXT TIGHTENING STEP
- NUMBER PART JUDGED HEADWINDS WOULD SUBSIDE ONLY SLOWLY
- MANY PARTIC SAID GLOBAL ECON STILL POSED RISK TO US
- SEVERAL PARTICPNTS ARGUED FOR PROCEEDING CAUTIOUSLY
- SEVERAL VOTING MEMBERS NOTED CURRENT FFR LOWER THAN DEC
Market reaction is muted, with a modest dip following the headline that some wanted an April rate hike, but the most notable mover is the USDJPY, which just crashed to fresh October 2014 lows of 109.34. Kuroda may want to wake up soon.
But the most notable finding: mention of the word global was approximately 22 times.
Just when did the central bank of the US, where pretty much everyone but the Fed is now talking about stagflation, also become the reserve bank of the world.
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Here is the discussion of April:
In light of this expectation and their assessment of the risks to the economic outlook, several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate. In contrast, some other participants indicated that an increase in the target range at the Committee’s next meeting might well be warranted if the incoming economic data remained consistent with their expectations for moderate growth in output, further strengthening of the labor market, and inflation rising to 2 percent over the medium term.
The Fed as “global” stock market barometer:
Participants generally agreed that the incoming information indicated that the U.S. economy had been resilient to recent global economic and financial developments, and that the domestic economic indicators that had become available in recent weeks had been mostly consistent with their expectations. Moreover, the sharp asset price movements that occurred earlier in the year had been reversed to a large extent, but longer-term interest rates and market participants’ expectations for the future path of the federal funds rate remained lower. Taking these developments into account, participants generally judged that the medium-term outlook for domestic demand was not appreciably different than it had been when the Committee met in December.
And here is the real reason why there will be no rate hike for a long time: the Fed is now terrified of the world’s (read China’s reaction function):
- Participants discussed the implications of the global economic and financial developments of the past few months for the medium-term outlook, and they offered different characterizations of the risks to the U.S. economy stemming from these developments.
- Many participants expressed a view that the global economic and financial situation still posed appreciable downside risks to the domestic economic outlook.
- Many participants indicated that the heightened global risks and the asymmetric ability of monetary policy to respond to them warranted caution in making adjustments to the stance of U.S. monetary policy.
- Participants generally agreed that the incoming information indicated that the U.S. economy had been resilient to recent global economic and financial developments.
- Most participants judged it appropriate to maintain the target range for the federal funds rate at ¼ to ½ percent at this meeting while noting that global economic and financial developments continued to pose risks.
- Economic activity had been expanding at a moderate pace despite the global economic and financial developments of recent months.
- They saw global economic and financial developments as continuing to pose risks.
- Global economic and financial developments continue to pose risks.
Here are the full minutes (link):
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