Investors are watching the upcoming Federal Open Market Committee, or FOMC, minutes for a clearer read on the thinking behind the Federal Reserve’s rate increase last month. Ian Lyngen, a strategist at BMO, said a fairly common market view before the last Fed meeting was that Chair Wash needed to raise rates to preserve the central bank’s policy credibility, rather than because recent economic data clearly demanded another round of tightening. Lyngen said the extent to which committee members discussed a similar "credibility hike" framework will be closely watched. If that idea appeared frequently in the minutes, he said, it could point to a more gradual path for future rate hikes, a view he said lines up with recent comments from Williams. He also said markets will focus on how the FOMC weighed risks around its dual mandate of full employment and price stability, as that discussion may help determine how strong the Fed’s appetite is for further tightening and whether markets have reason to treat the September move as a one-off action.
Investors are closely watching the upcoming minutes from the Federal Open Market Committee, or FOMC, for more clues on how Federal Reserve officials approached last month’s rate hike, according to BlockBeats.
Ian Lyngen, a strategist at BMO, said that before the previous Fed meeting, a fairly common market view was that Fed Chair Wash needed to raise rates to defend the central bank’s policy credibility, rather than because recent economic data clearly called for additional tightening.
Lyngen said: "The extent to which the committee discussed a similar 'credibility hike' framework will be very worth watching. If that line of thinking did receive meaningful discussion, it could suggest a more gradual path for future rate hikes, which would also be consistent with Williams’ recent remarks."
He added that markets will also focus on how the FOMC assessed the balance of risks in pursuing its dual mandate of full employment and price stability. That discussion could help investors judge how strong the Fed’s willingness is to keep raising rates, or whether markets have grounds to view the September increase as a one-off policy move.
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