The overarching theme of the minutes is worry. They’re worried about a slowdown in foreign growth and worried about low inflation.
- Many said Fed should remain on alert for fall in long-term market-based inflation expectations
The Fed is closely watching this chart.
5 year breakevens
Ten year breakevens are also below target at 1.84%.
What also grabs my attention is this headline:
- FOMC participants, in discussion on long-run goals, strategy, agreed moderate deviations above and below 2% inflation target equally costly.
That shows some uneasiness about low inflation.
But the main reason is that every time there are hawkish comments, it’s always ‘a few’ or ‘some’ while it’s always ‘many’ on the dovish side.
On removing ‘considerable time’ all but one voter thought it was appropriate to leave it in (that means even Richard Fisher wanted to leave it in, while Plosser didn’t). Looking toward next year with Plosser and Fisher retiring, the only hawk left is Esther George.
FX reaction
Like I wrote about earlier, the fundamentals don’t really matter because even if the Fed is slightly more dovish, the dollar is the only game in town. There was a brief dip in USD but it’s reversed.
