US: FOMC meeting minutes eyed today - Nomura

In addition to raising the policy rate 25bp to a range of 1.50-1.75%, the FOMC presented a much more optimistic outlook for the economy in its March Summary of Economic Projections (SEP), according to analysts at Nomura.

Key Quotes

“While the economic growth forecasts have moved considerably, we believe FOMC participants continue to underestimate the frontloaded nature of recent changes in US fiscal policy. In the recent press conference, Chair Powell said that “participants believe there will be meaningful increases in demand from the new fiscal policies for at least the next let's say three years.” However, we expect that the impact will be far more concentrated in H2 2018 and H1 2019. In the minutes, we expect more clarity indicating what the participants are assuming for the spend-out rate of the fiscal boost.”

“Another area of interest involves the FOMC’s assessment of trade risk. Although Chair Powell indicated that the consensus on the Committee is that trade risk should not affect its outlook at this point, it will be interesting to see more robust discussions in the minutes. Most participants have indicated a “wait and see” approach.”

“On inflation, many FOMC participants expected core PCE inflation to exceed 2% in the next couple of years but only slightly. We could glean some sense of how policymakers assessed potential inflationary pressure from further tightening of labor markets and how tolerant they are of above-target inflation.”