Breaking: Some FOMC policymakers see elevated uncertainty around economic outlook

Minutes of the FOMC's June 15-16 meeting revealed on Wednesday that the committee's standard of "substantial further progress" was generally seen as not having yet been met, per Reuters.

Market reaction

With the initial market reaction, the greenback weakened modestly against its rivals and the US Dollar Index, which touched a three-month high of 92.84, was last seen posting small daily gains at 92.58.

Key takeaways as summarized by Reuters

"Various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of incoming data."

"Several other participants, however, commented that reducing the pace of Treasury and MBS purchases commensurately was preferable because this approach would be well aligned with the committee's previous communications."

"Some participants saw the incoming data as providing a less clear signal about the underlying economic momentum."

"A few participants mentioned that they expected the economic conditions set out in the committee's forward guidance for the federal funds rate to be met somewhat earlier than they had projected in March."

"Some participants judged that the committee would have information in coming months to make a better assessment of the path of the labor market and inflation."

"Several participants emphasized, however, that uncertainty around the economic outlook was elevated and that it was too early to draw firm conclusions about the paths of the labor market and inflation."

"Several of those participants emphasized that the committee should be patient in assessing progress toward its goals and in announcing changes to its plans for asset purchases."

"For several participants, this heightened uncertainty regarding the evolution of the economy also implied significant uncertainty about the appropriate path of the federal funds rate."

"Several participants said reducing the pace of Treasury and MBS purchases commensurately was preferable because purchases of treasuries and MBS both provide accommodation through their influence on broader financial conditions."

"Participants generally agreed that the economic recovery was incomplete and that risks to the economic outlook remained."

"Participants generally judged that, as a matter of prudent planning, it was important to be well-positioned to reduce the pace of asset purchases, if appropriate, in response to unexpected economic developments."

"Inflation had risen more than anticipated, the increase was seen as largely reflecting temporary factors, and participants expected inflation to decline toward the committee's 2% longer-run objective."

"In coming meetings, participants agreed to continue assessing the economy's progress toward the committee's goals and to begin to discuss their plans for adjusting the path and composition of asset purchases."

"Participants reiterated their intention to provide notice well in advance of an announcement to reduce the pace of purchases."

"Participants judged that uncertainty around their economic projections was elevated."

"A substantial majority of participants judged the risks to their inflation projections were tilted to the upside because supply disruptions and labor shortages might linger for longer and might have larger or more persistent effects."

"FOMC members judged that the economic outlook had continued to improve and that the most negative effects of the pandemic on the economy most likely had occurred."

"Although they generally saw the risks to the outlook for economic activity as broadly balanced, a substantial majority of participants judged that the risks to their inflation projections were tilted to the upside."

"Several participants expressed concern that longer-term inflation expectations might rise to inappropriate levels if elevated inflation readings persisted."

"Several other participants cautioned that downside risks to inflation remained because temporary price pressures might unwind faster than currently anticipated."