Adam had the lowdown on the Fed minutes within … errr … minutes of the release: FOMC minutes: Taper likely in coming months on better data, minutes show
Its taken PIMCO’s Mohamed El-Erian a little longer, but he’s weighed in now:
- Little that is new or noteworthy in the sections on economic developments and prospects.
- a more muted immediate economic outlook (growth and inflation) coupled with somewhat greater optimism for the longer term—all on a baseline characterized by the usual references to “modest,” “moderate” and “cautious.”
On the tools available to the Fed:
From the interaction between the two main tools (asset purchases and forward policy guidance) to the consideration of new ones (lowering IOER), and from how and when to taper to the best way to communicate with markets, the minutes paint a truly complicated policy mosaic.
He follows with:
- Yet some aspects are less ambiguous.
the Fed wishes to encourage markets to delink their assessment of the two main policy tools—thereby enabling Fed officials to strengthen forward policy guidance, reduce (very gradually and carefully) heavy reliance on balance sheet operations and avoid a repeat of the May-June disruptions to the functioning of markets.
Fed officials may even be tempted into cutting IOER as a way to help manage this tricky and uncertain policy pivot.
Its Movember!
