What To Expect From FOMC Minutes? - Views From 15 Major Banks

The following are the expectations for today's FOMC minutes from the September meeting as provided by the economists at 15 major banks along with some thoughts on the USD into the event as provided by the FX strategists at these banks.

Goldman Sachs: The Fed will release the minutes from its September 17 meeting today. We will be looking for any indications regarding the timing of the Fed 'lift-off'. Our economists have noted that FOMC guidance about the appropriate lift-off point now seems more unified than earlier in the year. Since the meeting, Chair Yellen and Presidents Dudley, Rosengren and Williams have all reiterated that they expect a rate hike before year-end.

BofA Merrill: The minutes of the September FOMC meeting are likely to be scoured for clues about how close the non-hike decision was and what the Committee needs to see in order to hike later this year. Relative to market expectations, which interpreted the statement as very dovish and are not pricing a rate hike until well into 2016, the minutes could appear somewhat hawkish.Several recent Fed speakers have emphasized that the September meeting was a very “close call,” and that conditions for liftoff are likely to be satisfied soon. Market participants will be looking for signs of how strongly held this view actually is, and what conditions – particularly on the global front – might derail that expectation. Our base case is that the Fed begins a very gradual normalization process with liftoff at the December meeting. In a nutshell, the debate in the minutes is likely to boil down to the continuing strength of the labor market recovery versus continued low inflation and risks to the outlook originating from abroad. If the Committee sounds fairly convinced that there has been sufficient improvement in the labor market to start normalization – perhaps some residual slack notwithstanding – then that would be a hawkish message for the markets. We expect a divided Committee on the issue of “hidden slack,” the cyclical nature of the low participation rate, and the signal to take from low wages.

Barclays: Since the September FOMC meeting, a number of FOMC participants have declared that the decision not to raise rates was “close”. We look to the minutes to provide some insight into this statement. We also look to the minutes for context on the new sentence inserted into the September statement acknowledging risks from “global economic and financial developments.” The minutes are likely to reveal the balance of sentiment between those members who preferred to look through these risks and those members who pushed to postpone any rate hike in an abundance of caution," Barclays projects. "In addition, the minutes should reveal the number of members who are focused on economic activity abroad rather than just the financial market spillovers to the US. Keeping in mind that our call for March lift-off rests on both our forecast path of inflation and the FOMC’s growing concern about low US inflation, we will be attentive to members’ views on the prospects for inflation normalization in the external environment.

RBS: The clear concern expressed by the Chair at her post-decision press conference about international developments, and the decision to add new phrases about these international developments to the FOMC statement, likely means that a discussion of EM softness, the stronger USD, and potential spillovers to the US featured prominently in the minutes. Still, Chair Yellen said that the committee discussed hiking the policy rate during the September meeting, and an indepth discussion of the debate over whether to begin rate hikes will certainly be notable. The nuance of this discussion may drive the USD reaction – a sense that most members were united in the view to leave rates on hold in September may provide a sense of calm that rates are likely to remain low, but a strong debate over the merits of a move in September may give the sense that the Fed was much closer to hiking the policy rate than the commentary or forecasts implied. Of course, these minutes pertain to a meeting that took place before the disappointing September NFP report. On procedural measures, any mention of adding a press conference to the October meeting could be taken as hawkish.

BNPP: We expect today’s minutes of the September FOMC meeting to contain plenty of indications that most Committee members expected to be hiking rates by December. However, the information is likely to be viewed as stale as it pre-dates the September jobs numbers

Credit Agricole: Today’s focus is on the September FOMC minutes. They should shed light on the Fed’s thinking in regards to domestic and international risks. We expect to read that the committee decided to delay firming policy due largely to global financial turbulence – notably China. The minutes are likely to show the tighter financial market conditions that resulted from the EM shocks (stronger dollar, wider credit spreads and equity market declines) was key in driving the Fed’s decision to remain on hold. These shocks, in turn, could hamper the Fed’s ability to hit its medium-term inflation target. But the minutes are also likely to show that the Fed’s upbeat view of the labour market persists. In this regard, we think the Fed will emphasise the strength of the labour market, which continues to remain their favoured forecasting tool for inflation. In the end, we doubt the minutes will sound an all clear on a December rate hike. Even so, it is likely the minutes will show the Fed was much closer to a rate hike than many believe, helping to stabilize the recent sell-off in the greenback.

JP Morgan: Today’s FOMC Minutes will be worth watching to get a sense of how close a call the last meeting was, although given the developments since the meeting it does seem like old news at this point, and would be surprised if any reactive move were to extend materially as a direct result of the content of these minutes. Maintain a neutral/tactical bias for now in Euro, keeping a close eye on equity markets.

SocGen: FOMC members have rushed to tell us how finely-balanced the choice was at September’s meeting, between hiking rates and staying on hold...This evening’s Minutes will probably indicate a closer call than was actually the case, but perhaps a slightly hawkish bias is (marginally) dollar-positive.

Nomura: The FOMC kept its rates target consistent at the meeting, but there appeared to have been significant disagreement in the ranks of FOMC members. The minutes should provide more clarity on the internal debate regarding liftoff, and provide insights into their views on global growth and financial conditions. Any discussion of the monetary policy path will be of particular note as well.

UBS: The minutes will throw more light on the September decision, especially the external components. However, the focus will likely be more on the tone used for any rate hike decision in Q4 amid low inflation in US and the global economic slowdown.

Commerzbank: Comments by various FOMC members following the meeting illustrated that the FOMC was indeed very close to raising interest rates at the time. That is likely to be reflect-ed in the minutes of the meeting. So the minutes are likely to sound quite hawkish. Even though it is of course clear that the meeting took place before the last disappointing labour market report the minutes are likely to illustrate once again to the market that even the numerous doves amongst the FOMC are beginning to review their position. So there is a possibility that this will shake the currently dominant market view that a Fed rate hike is not imminent. So whoever is going to bet on a weaker USD should perhaps wait for tonight’s publication of the minutes.

Deutsche Bank: Today sees the release of the FOMC minutes from the September 16th/17th meeting. Usually this would be the primary focus for markets on any given day, but it’s fair to say that these minutes are pretty stale now given the latest jobs report, the drop in market expectations for a Fed hike this year and the recent trade data numbers and the implications of those for US GDP growth.

Citi: Today's FOMC minutes the only first tier release before the end of the week. Since the meeting, many members have pushed back against the market dovish take, reiterating calls for 2015 hikes. While there could subsequently be a more hawkish lean, the minutes seem dated at this point.

Danske: Tonight, FOMC minutes from the September meeting will be released. The minutes are likely to reveal a lengthy discussion about whether the Fed should lift rates with a clear majority, expressing some concern over the global developments as signalled by the soft tone by Janet Yellen at the press conference following the meeting.

SEB: The Fed’s statement following the September decision was dovish and recognized increased global risks (i.e. China/EM). Markets interpreted this and the new set of forecasts as the Fed will be on hold until well into 2016. However, 13 out of 17 officials are still predicting a rate hike this year and in a speech after the meeting Yellen underscored the risks inherent in moving too late. Former chairman Bernanke said in an interview yesterday that it will take a few months to gauge how much the international economy and market developments are affecting a growing US economy. Clues on this and how it will impact the possibility for a liftoff before year-end will be in focus.

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