The Fed hiked rates by 0.25% at this meeting
Highlights of the Minutes:
- Almost all officials saw upside risks to growth on expectations fiscal policies will be more expansionary under Trump
- About half of policymakers incorporated those assumptions into forecasts
- Many saw increased chance of faster rate hike pace due to higher risk of sizeable undershooting of longer-run normal unemployment rate leading to higher inflation
- Policymakers emphasized their considerable uncertainties on timing, size and composition of legislative and spending changes
- Almost all members saw unemployment rate running below longer-term normal level
- Generally agreed o continue to closely monitor inflation
- Full text
"At this meeting, members continued to expect that, with gradual adjustments in the stance of monetary policy, inflation would rise to the Committee's 2 percent objective over the medium term as the transitory effects of past declines in energy prices and non-energy import prices dissipated and the labor market strengthened further. This view was reinforced by the rise in inflation in recent months and by recent increases in inflation compensation. Against this backdrop and in light of the current shortfall in inflation from 2 percent, members agreed that they would continue to closely monitor actual and expected progress toward the Committee's inflation goal."The knee-jerk reaction in the FX market was disappointment and the US dollar fell 30 pips but it quickly rebounded back to unchanged.
On the election, here is what the Minutes said:
"Asset price movements as well as changes in the expected path for U.S. monetary policy beyond December appeared to be driven largely by expectations of more expansionary fiscal policy in the aftermath of U.S. elections."FOMC members really should have gotten on the same page about whether they would include anticipated election changes or not. Or delivered two separate sets of forecasts. To me, it seems like a blunder to make economic forecasts based on election promises.