Minutes of the Federal Open Market Committee January meeting due in the US today, at 1900 GMT

It has been brought to my attention that the world does not revolve around Australia and hence the wages data was not the biggest event on Wednesday. Shocked, I am

So, here goes ...

Previews of what to expect (bolding mine) via ...


  • The FOMC minutes from the 30-31 January meeting should provide additional color on what we perceived to be a marginally hawkish post meeting statement
  • In particular, the minutes will likely provide added context on the addition of the word "further" in two key sentences of the forward guidance paragraph of the statement. Moreover, the minutes may provide a rationale for other language changes including an upgrade to the FOMC's near-term inflation outlook.
  • The minutes will not, however, be timely enough to provide a view on the Committee's reaction to recent financial market developments. Thus far, most FOMC participants who have commented publically on financial markets have indicated that the turbulence from the past few weeks has not fundamentally reshaped their medium-term outlook.
  • The combination of market unrest, a strong core CPI print for January and the recently-passed budget agreement to boost federal spending appears to be engendering more interest than usual in Chair Powell's first public remarks on 28 February before Congress
  • In that sense, the January minutes may contain less information than usual given recent developments. We continue to expect a rate hike at the upcoming 20-21 March meeting, followed by three additional hikes in 2018 (Jun, Sep and Dec) and two hikes in 2019 (Mar and Sep).


  • FOMC minutes for the January meeting should garner a great deal of attention.
  • Given the market's obsession with inflation, we think the odds that the minutes are interpreted as reinforcing this narrative of a firming inflationary backdrop are high.
  • The tweaks to the press statement were significant enough that the minutes are likely to read hawkish overall.
  • During the middle of last year, the Fed began promoting the idea that inflation would "remain somewhat below" its 2% target. They finally dropped that phrasing to now acknowledge that inflation will "move up" this year. This admission by the Fed is yet another step away from what has been an underlying dovish thread within the committee. Some of the details around this debate should be forthcoming in the minutes and are likely to be viewed as a decisive shift.
  • The other change was the insertion of the word "further". As in "further gradual increases" in rates will be necessary. The Fed does not accidentally insert words into the statement (they may make poor decisions with new insertions, but they don't end up there by accident). It seems entirely reasonable that this is a preamble to perhaps a more forceful tone on rate hikes as the year progresses. We think there is a high probability that the Fed moves the dots to 4 hikes in 2018 (from 3) near-term and that the minutes could be another step in reinforcing this.


  • Why did the FOMC insert the word "further" in front of "gradual" in the January 31st FOMC statement? That may be a tip-off to the discussion that will land at 2pmET on Wednesday. Was it a sign that the FOMC consensus led by former Chair Yellen was preparing the way for a possible upward revision to the dot plot that could raise the median projected fed funds target rate? Or is too much being read into this? What would suggest that the wording change was deliberate is that they've used a similar tactic to convey a modest bias shift in the past.
  • Recall that in the January 2017 statement, the Fed said that "only gradual" rate hikes would be forthcoming in a somewhat more dovish alteration and then subsequently dropped "only" and simply retained "gradual" language over the duration of the year as the FOMC hiked three times in 2017. Also note that to interpret the addition of this word as a more hawkish direction generally fits the broad tone of the rest of the statement's changes that upgraded the inflation and growth language.
  • Developments since the FOMC meeting have been generally more hawkish at the margin and so if anything the minutes risk lagging these developments. FOMC officials such as Dudley and Mester have tended (rightly imo) to downplay market turbulence to date. By contrast, jobs rebounded and wage growth accelerated to 2.9% y/y while CPI inflation surprised to the upside of expectations by holding steady in January (albeit for narrow reasons, here). That was the fastest wage growth since June 2009 although partly due to annual rebasing and adjustments for a different pay period during January 2018 versus the prior January.