Analysts at Rabobank explained that the minutes of the FOMC meeting of September 25-26 did not provide much new information.
Key Quotes:
“They confirmed what we already knew from the September statement, projections, press conference, and minutes of earlier meetings. Despite President Trump’s concerns, the FOMC expects that further gradual increases in the target range for the federal funds rate will be appropriate. In practice, this means one hike of 25 bps per quarter until the policy rate becomes ‘modestly restrictive’ (=3.4% according to the FOMC projections). Only a couple of participants do not favor overshooting the estimated neutral rate (3.0%).”
“In their discussion of the possible inversion of the yield curve, the participants repeated their views expressed in previous minutes. Interestingly, the minutes also noted that the recent rise and possible further increases in longer-term interest rates might diminish the likelihood that the yield curve would invert in the near term. However, in our view any sustained steepening will only encourage the Fed to continue hiking until it finally inverts the yield curve. After all, the majority in the FOMC thinks that this time is different and inversion would only indicate that we have arrived in restrictive territory. In contrast, in our view an inversion would be a warning signal of a recession.”
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