Analysts at Nomura offered their review of the September FOMC minutes that held few surprises as most of the main topics had already been discussed publicly by Chair Powell and others.
Key Quotes:
“The discussion on recent economic activity, with the economy “evolving about as anticipated,” was consistent with the minimal changes to the post-meeting statement in September. The Committee solidified the outlook for a fourth 2018 hike in December by noting that “”¦participants generally anticipated that further gradual increases in the target range for the federal funds rate.”
“The Committee spent more time emphasizing risks to the outlook from external developments including a stronger dollar – as a result of diverging US and foreign growth – and potential emerging market stress. Some participants mentioned leveraged loan growth and the loosening of standards on those loans as possible risks to financial stability despite overall accommodative financial conditions.”
“While the Committee has recently become more mindful of risk from financial imbalances, we do not think such concerns are driving policy decisions at this point. In addition, the minutes continued to highlight downside risk from trade policy developments on growth.”
“However, these downside risks were balanced by “high consumer confidence, accommodative financial conditions, or greater-than-expected effects of fiscal stimulus.” Taken altogether, the minutes did not change our outlook for monetary policy. We continue to expect an additional hike in December followed by two hikes in 2019.”
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