Fed minutes: Most anticipate a hike "fairly soon" - BBH

With a light diary today, many participants are still talking about the minutes from the FOMC meeting notes analyst at BBH.  

Key Quotes

“A key issue is whether the recent official comments that indicate that March was a live meeting supersede the minutes older minutes.  The minutes said that most anticipate a hike "fairly soon."  This does not mean March.  In the meetings that preceded the two rate hikes in this cycle, there were mentions in the minutes of the next meeting.  There was no such mention this time.  "Fairly soon" seemed to be a way to give guidance to the market and distinguish it from "next meeting" but also from waiting for the end of the year as was the case in 2015 and 2016.”

“The minutes from the FOMC meeting are not simply an objective report of the meeting, but it is a communication tool.  This is something the ECB may not quite get, especially given its difficulty in even calling its record of the meetings “minutes.”  Because it includes voting and non-voting members, we often find that it is noisy, but after the FOMC statement and projections, and comments by the Fed's leadership, the minutes are the third most important tool in our understanding.”

“The other revelation in the minutes was the use, starting next month, of fan lines to illustrate the range of uncertainty around economic projections.  Many have called for something like this.  It will help the investors, many of whom continue to wrestle with the significance of the forecast and confuse them with policy commitments.”

“Consider the shift in expectations.  Using the Bloomberg calculation of the odds embedded in the Fed funds futures for comparison purposes, there is a 34% chance of a Fed hike in March.  A week ago it was 36%.  The odds of a May hike have risen to 61.8% from 58.7%.  The odds of a June move are unchanged at a little above 76% chance.  While obviously a significant minority has not given up on a March hike, it is interesting that others are also seeing the merits of a May hike like us.  Two regional Fed presidents speak today, Lockhart and Kaplan, but their views are known and will unlikely have much market impact.”

“Look for the focus to shift from the Fed back to the President Trump.  In particular, next Tuesday's speech to a joint session of Congress is seen as key.  The Republican tax reform, which had the border adjustment at the center, is unraveling.”