FOMC Minutes: Highlights&Recap
Aside from a discussion on how to address persistently low inflation, today’s FOMC Minutes release was far from a blockbuster.
The bulls are back on Wall Street, with the leading stock market indices posting solid rallies. With only a few hours to go until the closing bell, the DJIA DOW (+145), S&P 500 SPX (+20), and NASDAQ (+96) are all deep into the green. The heavy action is a bit unusual as the FOMC Minutes typically cause investors to pause while the FED’s dialogue is interpreted.
On the commodity front, it’s worth noting that gold has put together another day of solid gains. Values are now above $1600 and at levels not seen since early 2013. Although the Trump Rally in U.S. equities continues to be the lead story in finance, the 12-month performance of bullion is certainly impressive.
FOMC Minutes: Recap And Highlights
The January 28-29 FED meeting was a ho-hum event, largely dominated by uncertainty surrounding the coronavirus. Other than policy being “data-dependent” and “appropriate,” not much was revealed at Jerome Powell’s presser. Today’s FOMC Minutes release showed us that there wasn’t a whole lot going on behind the scenes. Here are few of the highlights:
- “Participants discussed how maintaining the current policy stance for a time could be helpful in supporting U.S. economic activity.”
- Several officials lobbied the potential benefits of “inflation modestly exceeding 2%” for an undisclosed period of time.
- In Q2 2020, levels of reserves would “support slowing the pace of T-bill purchases.”
- The FOMC held the Federal Funds Target Rate at 1.5%-1.75% by a unanimous vote.
Bottom Line: Today’s FOMC Minutes release was far from a blockbuster. The only moderate surprise was the FED discussing the tools at their disposal to battle persistently low inflation. One such suggestion was to abandon the long-term symmetrical rate of 2.0% in favor of three fluctuating bands. Although this policy is unlikely to be implemented, the discussion does suggest that FOMC members continue to be concerned about lagging inflation. Only time will tell how the sub-par inflation dialogue pans out.
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