The January FOMC Minutes

The apparent evolving change in the sentiment of a growing number of FOMC members seems to be moving toward ‘normalization’ of their policy moves and away from the free flow that we have experienced over the last several years….a look at yesterday’s reaction to the release of the meeting minutes that moved the market (both stock and yield curve – both downward) was very interesting.

My take – volatility will continue to lead the way, yield curve fluctuations will most likely be many and often, between monetary and fiscal policy we are still in for a bumpy ride so keep your seatbelts fastened…and don’t bet long on the curve.

The January FOMC Minutes did contain a surprise yesterday (evidenced by the subsequent market moves), that a group of FOMC Members are leaning toward slowing or ending asset purchases before there has been substantial improvement in the labor market.

According to the Minutes, “A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.”

“A number” of Members does not imply a majority in Fedspeak, but it does imply more than a few which means this sentiment is gaining steam. There were still “several” other Committee Members who said that “the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved.”

It is not uncommon for FOMC Members to voice disagreement with policy decisions, but this chorus of concern is growing.

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