Fed Minutes to Give Hints on Officials' Mood Ahead of Final Meeting of 2017
November 22 2017 - 5:59AM
Dow Jones News
By Harriet Torry
The Federal Reserve at its last meeting held short-term interest
rates steady but gave a more favorable assessment of the economy.
The central bank at 2 p.m. EST Wednesday will release minutes from
the Oct. 31-Nov. 1 meeting that should shed more light on
officials' views ahead of their final policy gathering of the year
in mid-December, when the central bank is expected to raise rates.
Here's what to look for:
Rate Signals?
Fed officials have left their benchmark federal-funds rate
unchanged in a range between 1% and 1.25% at their last three
meetings. At their Sept. 19-20 policy meeting, they penciled in one
more quarter-percentage-point rate rise in 2017, and Dec. 12-13 is
now the last scheduled policy meeting of the year.
Fed officials have done little to dissuade high market
expectations of a rate increase in December, so they might see no
need for the minutes to send a strong signal about the timing of
their next move.
The readings on the economy's overall health when officials
headed into their last meeting suggested growth remains strong,
despite the hurricanes that hit the Gulf Coast in late summer and
muddied data readings like the jobs report for October. As a
result, the Fed's Nov. 1 policy statement upgraded officials'
assessment of recent economic growth to "solid" from September's
wording that economic activity was "rising moderately." That might
be all the signaling we will get on a December rate rise.
Inflation Questions
Officials' views on inflation will be crucial to their decision
on whether to raise rates in December, as well as for the path of
policy in the years ahead.
Minutes from the Fed's September meeting showed that lingering
questions over inflation were driving a split among officials. The
key question was whether the recent soft patch was due to temporary
factors or longer-lasting developments, and that debate likely
continued at the Fed's last meeting since the data officials had on
hand then hadn't shown a breakout in inflationary pressures.
Fed officials, including Chairwoman Janet Yellen, have expressed
puzzlement about the shortfall in inflationary pressures in recent
months.
Speaking in New York on Tuesday, Ms. Yellen said she is "keeping
an open mind" about inflation since "it may be that there is
something more endemic or long-lasting here that we need to pay
attention to." Her comment that "my colleagues and I are not
certain that it is transitory, and we are monitoring inflation very
closely" could be reflected in the minutes.
Brewing Dissent?
While the minutes could show how officials feel about a rate
increase in December, recent comments expressing concerns about
weak inflation suggest some could consider dissenting if a rate
rise is approved then. No one dissented to the Nov. 1 decision to
hold rates steady.
The minutes also could cast light on any internal divisions over
how the economy is faring. If any participants took issue with the
decision to upgrade the statement's description of the economy to
"solid," the minutes likely will lay that bare.
The Portfolio
The Fed in October launched its long-anticipated plan to slowly
wind down its $4.5 trillion portfolio of mortgage and Treasury
securities. Markets have taken the runoff in stride, and Fed
officials remarked in the run-up to the last meeting that the
drawdown of the so-called balance sheet appeared to be going well
from a market perspective. The minutes could show how U.S. central
bankers felt about the start to the long-awaited move behind closed
doors.
Write to Harriet Torry at harriet.torry@wsj.com
(END) Dow Jones Newswires
November 22, 2017 05:44 ET (10:44 GMT)
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