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Outside risks and uncertainty  are seen in the minutes.  There is a danger of overshooting in the employment and inflation mandates. It is too early to tell which impact fiscal stimulus will have.

Around half incorporated assumptions for fiscal stimulus in their assumptions. They did not mention President-Elect Donald Trump but did  note the reaction in markets to his election.

We can assess that the shift to a forecast of three rates hikes in 2017 came due to expectations from Trump’s stimulus. This is an uncertainty at the moment. Did the Fed get ahead of itself? If so, the dollar could reverse its gains.

They discussed closely monitoring inflation. The members currently see it as rising, but focus on the diminishing base effect of oil prices. They seem somewhat hesitant to discuss a real rise in core inflation.

All in all, they seem positive about the economy, but they did take fiscal stimulus into account. Here is a quote from the statement:

Moreover, participants generally made only modest changes to their forecasts for real GDP growth, the unemployment rate, and inflation. About half of the participants incorporated an assumption of more expansionary fiscal policy in their forecasts.

The US dollar is lower in the immediate aftermath. EUR/USD touched 1.05 but now retreats.

Here is how the reaction to the meeting minutes looks on the EUR/USD 1-minute chart: quick choppiness without any clear new direction.

The FED releases minutes from the  December 2016 meeting. In that event, Fed Chair Janet Yellen and her colleagues announced a 25bp rate hike, as widely expected.  The FOMC did surprise markets with an upgrade in the path of rate hikes for 2017: the dot-plot showed three hikes, up from two forecast beforehand.

The US dollar has been on the back foot ahead of the publication, after a strong start to 2017. EUR/USD rose above  the 1.0460 line, GBP/USD topped 1.23 and USD/JPY dropped to 117.40. Among commodity currencies, USD/CAD  fell all the way to 1.33, AUD/USD recovered to 0.7270 and NZD/USD lagged but reached 0.6950.

The FOMC did surprise markets with an upgrade in the path of rate hikes for 2017: the dot-plot showed three hikes, up from two forecast beforehand. The unprecedented upgrade of the interest forecast and the upbeat message about employment and also inflation sent the  dollar shooting higher.

The minutes from the meeting were  projected to shed more light on the discussion and the sentiment. Are members bullish on  inflation? Did they take Trump’s promises about fiscal stimulus into account?

More:  FOMC Minutes to explain hawkish shift – 4 opinions