With earnings season taking a breather before next week’s return, one topic that will be part of the conversation this holiday week is the release of today’s Federal Reserve Federal Open Market Committee (FOMC) meeting minutes. The FOMC includes 12 members: seven members from the Federal Reserve System’s Board of Governors, the president of the Federal Reserve Bank of New York and four Reserve Bank presidents, who have one-year rotating terms.
Tuesday’s minutes will come from the March 13 FOMC meeting and will contain information that has not been previously published. They will be distributed at 2 p.m. ET and market watchers will parse through the information and try to gauge where the FOMC stood less than a month ago on the current economy and what they see is ahead.
So why release the minutes on this first Tuesday afternoon of a new month? The FOMC holds eight scheduled meetings every year. According to federalreserve.gov, during these meetings, “the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.”
Upon completion of these meetings, a press release is distributed by the Committee at 2:15 ET PM. Here’s the one from the March 13 meeting.
Then, beginning in December 2004, the Committee declared the release of its meeting minutes will be distributed to the public three weeks after the latest policy decision. Prior to this, there was a six-week lag time.
The minutes are a summary of the “significant policy issues” discussed by the meeting attendees. It includes all decisions made by the group for policy issues and then it subsequently explains their reasons for them.
What to look for in Tuesday’s Meeting Notes
Investors will look for content on whether the Fed will have additional easing. During the last few weeks, central bankers, including voting and non-voting FOMC members, have made remarks on the Fed’s pledge to keep rates anchored through late 2014 but they have also shown an increasing divisiveness among the central bank.
If the minutes have a hawkish tone, the dollar could stay the same while investors mull the options for upcoming monetary policy as they wait for Friday’s employment numbers. On Monday, Federal Reserve policymakers showed little inclination for additional monetary action to trigger U.S. growth for a gradually improving economy.
We expect that the meeting included a discussion of possible easing options. This discussion would likely include four main topics: 1) the benefits of mortgage purchases; 2) the potential for more “twisting”; 3) the appropriate way to communicate any additional easing; and 4) the pros and cons of sterilized asset purchases.
In Fed officials’ discussion of the economic outlook we expect a focus on the labor market, and why job growth appears to be outpacing GDP. Chairman Bernanke detailed his own views in a recent speech but other Fed officials may have differing opinions. Developments in European financial markets were also likely on the meeting agenda in March.
The March FOMC minutes could have implications for our policy call, which is currently for additional QE in the second quarter. If the minutes do not include a discussion of easing options, contrary to our expectations, or if the committee upgrades its view on the outlook significantly, this would probably take an easing at the April 24-25 meeting off the table, and may well push it out further.