Reading through all the commentary on the FOMC minutes, one thing is abundantly clear — everyone is worried about hawkish commentary.
With economic data picking up there are only two paths for the Fed, neutral or more hawkish. So far Yellen has resisted shifting the Fed toward sooner rate hikes but you the dollar strength in the hours leading up to the minutes show that traders are nervous.
The FOMC minutes can be a self-fulfilling prophesy because there’s so much text and you can find something to justify a hawkish or dovish slant. If the hawks are disappointing it will likely be due to the comment on inflation. Several Fed members think higher CPI and PCE recently is due to transitory factors and will fall.
Interesting comment from BNPP and others here:
For all of the previous Fed meetings this year the reaction to the minutes has been the opposite of the announcement. This suggests USD could draw some encouragement from the tone of the broader policy discussion in contrast to the dovish-leaning comments by Fed Chair Yellen at the press-conference.
The WSJ is also out with a preview and they spoke with Alan Ruskin from Deutsche Bank:
The evolution of moderates turning more hawkish is expected to show up in the minutes partly through the classic FOMC parlance, as more hawkish comments evolve from being attributed to a ‘few’ participants to ‘several’ to ‘most,’” Mr. Ruskin said. “The anonymous nature of the comments in the minutes has very likely contributed to the minutes having a greater impact than if the comments had clear attributions.”
