10 Apr 2014
Fed concerned about misleading market on interest rates - WSJ Hilsenrath
FXStreet (Bali) - After the FOMC minutes publication, the main take away from Jon Hilsenrath, the Fed watcher from the Wall Street Journal, is the concern by Fed official about misleading on interest rate expectations.
As Hilsenrath comments: "Some officials argued they needed to send a stronger signal that they wanted to see inflation move up toward the Fed#s 2% objective. Some also worried that their interest rates projections might be incorrectly viewed as leading toward a more restrictive policy."
Key passages from the Fed minutes - WSJ
1) Fed officials worried projections for short-term interest rates could be misleading: Some officials pushed up their projections for rates in 2015 and 2016, which would be made public in the Fed#s release of projections with its official policy statement. They wanted to avoid sending the message that the group as a whole anticipated more restrictive credit policies.
2) Worries about continued run of inflation below the 2% objective: Some officials wanted to make it clearer in their policy statement that the Fed wouldn#t tolerate low inflation and they agreed to monitor the data carefully.
3) Low rates for the long run: Fed officials agreed that they would likely keep short-term interest rates low well into the future, but they had different reasons for coming to this view:
4) Staff a little more pessimistic: Fed staff members shaved down some of their growth projections and said the recent weakness wasn#t all because of bad weather.
5) China focus: Officials appear to have become a bit more concerned about the economic outlook in China.
6) A 3 day meeting: Janet Yellen is known inside the Fed as a glutton for preparation. That proved true at her first meeting as chairwoman. She gathered Fed officials on a March 4 conference call, two weeks before the planned meeting, to discuss some of the issues that would come up when they met in person March 18-19. This is an early clue on Ms. Yellen#s leadership style # preparation and lots of consultation with colleagues.
As Hilsenrath comments: "Some officials argued they needed to send a stronger signal that they wanted to see inflation move up toward the Fed#s 2% objective. Some also worried that their interest rates projections might be incorrectly viewed as leading toward a more restrictive policy."
Key passages from the Fed minutes - WSJ
1) Fed officials worried projections for short-term interest rates could be misleading: Some officials pushed up their projections for rates in 2015 and 2016, which would be made public in the Fed#s release of projections with its official policy statement. They wanted to avoid sending the message that the group as a whole anticipated more restrictive credit policies.
2) Worries about continued run of inflation below the 2% objective: Some officials wanted to make it clearer in their policy statement that the Fed wouldn#t tolerate low inflation and they agreed to monitor the data carefully.
3) Low rates for the long run: Fed officials agreed that they would likely keep short-term interest rates low well into the future, but they had different reasons for coming to this view:
4) Staff a little more pessimistic: Fed staff members shaved down some of their growth projections and said the recent weakness wasn#t all because of bad weather.
5) China focus: Officials appear to have become a bit more concerned about the economic outlook in China.
6) A 3 day meeting: Janet Yellen is known inside the Fed as a glutton for preparation. That proved true at her first meeting as chairwoman. She gathered Fed officials on a March 4 conference call, two weeks before the planned meeting, to discuss some of the issues that would come up when they met in person March 18-19. This is an early clue on Ms. Yellen#s leadership style # preparation and lots of consultation with colleagues.