FAST FIVE: Fed Minutes: "Almost All" Fed Officials Want Plan To Stop Reducing Balance Sheet By Year End

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Key update: it appears that in its rush to blast the fastest headline on the Minutes, Bloomberg made a material error, reporting the following: BBG: ALMOST ALL FED OFFICIALS WANTED TO HALT RUNOFF LATER THIS YEAR That however is incorrect, and Reuters captured what the Fed really said, which is significantly different from what the Fed actually said, to wit: REUTERS (correct): ALMOST ALL PARTICIPANTS THOUGHT IT WOULD BE DESIRABLE TO ANNOUNCE PLAN TO STOP REDUCING BALANCE SHEET LATER THIS YEAR And here what the Fed actually said: Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve's asset holdings later this year.

This interpretation was seen as consistent with the behavior of the most recent survey-based measures of expected inflation, which were little changed.” On inflation expectations, the Fed appears to be turning more dovish; in fact according to the last bullet, the Fed may finally be realizing that Japanification is coming: “many participants commented that upward pressures on inflation appeared to be more muted than they appeared to be last year despite strengthening labor market conditions and rising input costs for some industries.” “The upside risk that inflation could increase more than expected in an economy that was projected to move further above its potential was counterbalanced by the downside risk that longer-term inflation expectations may be lower than was assumed in the staff forecast, as well as the possibility that the dollar could appreciate if foreign economic conditions deteriorated.” “In their discussion of indicators of inflation expectations, participants noted that market-based measures of inflation compensation had moved lower in recent months.

Participants expressed a range of views in interpreting the decline in inflation compensation.

Some participants were concerned that the point estimates were being misinterpreted as committee members' consensus view on the appropriate policy path — they are not.

The projections look to be caught up in the larger discussion of appropriate communication strategies as we hover near the neutral rate.

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