The Fed is due to deliver its meeting minutes later in the day. What can we expect?
Here is their view, courtesy of eFXdata:
Bank of America Merrill Lynch Research discusses its expectations for tomorrow’s FOMC minutes from the January meeting.
“The minutes of the January FOMC meeting will be of particular interest given the extreme dovish pivot from the Fed. We will be looking to learn about the following: 1)why did the Fed go from signaling additional hikes in December to no further hikes just six weeks later in the January meeting? 2) What is the Fed watching to determine next steps? Is it global data? Financial markets? 3) How has the Fed‘s thought process revolved around the balance sheet normalization process?,” BofAML notes.
“On hikes, we think there will be a consensus that the best move is for the Fed to signal a pause…On risks, we expect a discussion about the global backdrop, with particular attention on the slowdown in China and the weakness in Europe…The balance sheet discussion may be the most notable. The Fed put out a statement with the last meeting which said that the Fed will embrace the “abundant” reserve framework and will allow the balance sheet to adjust to economic conditions. However, we are still missing details. What is the timeline? Is there a target for the optimal level of reserves? Will the Fed taper? We think the Fed will drop some hints on these issues in the minutes as a way of testing the market reaction,” BofAML adds.
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