Key points from the minutes of the October FOMC meeting

The minutes of the 29-30 October FOMC meeting were on balance slightly more dovish than the statement.

First, there were “a few” participants of the FOMC who did express concern that inflation could run below the Committee’s two percent target for quite some time. In addition, "many" highlighted the importance of watching for a downward shift in longer-term inflation expectations, which could make it even more worrisome if growth faltered. Although “most participants” continue to expect inflation to move back to the Committee’s two percent target over the medium term, it nevertheless leaves a slightly more dovish impression than the FOMC statement.

Second, the statement did not mention the deterioration in foreign economic and financial conditions at all nor the appreciation of the USD. The minutes show that the reason is clear: “many participants saw the effects of recent developments on the domestic economy as likely to be quite limited”. Hence, we need further weakness in global growth and/or financial markets before it becomes a real concern for the Fed.

Third, the “considerable time” phrase was discussed. However, there is no indication that the Committee is about to change that wording in December. It seems that the new reference to data dependency in the October statement is preferred for now (i.e. “if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated”).