Although the Fed’s most recent meeting occurred just three weeks ago, the minutes of that meeting released this afternoon had already gone stale.
Not possessing ESP or a reliable crystal ball, the Federal Open Market Committee (FOMC)did not assess a scenario for a Trump victory and the associated repricing of bonds, equities and currencies – not to mention repricing of the Fed’s own interest rate lift-off path. Suffice it to say the minutes of the November 1 and 2 Fed meeting are very consistent with the statement released after that meeting.
The minutes reveal a committee that had expected to hike at the meeting on December 13-14. Developments since then – especially the prospects for fiscal expansion that would reflate a fully employed U.S. economy – could only have strengthened the case.
Monetary policy framework intact
Reading more deeply into the minutes, we learn that the committee received a staff briefing on alternative potential long-run frameworks for monetary policy operating regimes and balance sheet management. Of perhaps most interest was the revelation that “most participants did not indicate support for using the balance sheet as an active tool in other situations,” unless, such as in recessions, where the zero lower bound is binding.
The minutes also went out of the way to say that no changes to the monetary policy framework are imminent and that the Fed would proceed “cautiously” and any changes of this sort would be communicated well in advance.
