FOMC minutes preview: the minutes will be scrutinized
FOMC minutes preview: the minutes will be scrutinized for more clues on the Fed's pivot to a more dovish point of view, even as rates were left unchanged. Also crucial will be what's said about the balance sheet and a shift to "flexibility" from "auto pilot." However, analysts suspect the market will be disappointed by the lack of firm details on the latter. Analysts already knew from Chairman Powell's press conference and other Fedspeak that the slowdown in growth, tighten financial conditions, and geopolitical uncertainties, and importantly low inflation, were the main factors behind the shift to a more dovish outlook. And he said the onus is on price pressures to force a rate move. Remember the January statement dropped the key phrase from December that "the Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity." And it replaced it with "In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes." And on the balance sheet, many officials see the run-off ending later this year. But it's still an open question, it seems, regarding the ultimate size -- so far analysts know it will be larger than pre-crisis, with an "ample" supply of reserves. The FOMC is also discussing the the composition of the portfolio and whether it will be the more traditional Treasury only, and whether there will be a concentration in bills or purchases will be across the curve. A nod to the former could help stave off a curve flattening/inversion. Note Washington is closed, though the minutes will be released on the website.