On December 14, 2004, the Federal Open Market Committee announced that they would release the minutes of each meeting with a three week lag. This is a vast improvement from the previous release of the minutes which ranged from a six to eight week lag. While the FOMC releases a statement after each meeting which describes the policy action (or inaction), the minutes generate a lot of attention in the financial markets because they reveal more details on the discussion of the most recent FOMC meeting. Why Investors Care
Highlights
FOMC Minutes for Dec 12, 2006 Released 3 Jan 2007
The minutes of the December 12, 2006 FOMC meeting indicate that the Fed is a little closer to deciding to lower interest rates to a neutral stance - but not yet. The inflation hawks still dominated the FOMC decisions through the last FOMC meeting. The key information from the latest round of minutes is that some on the FOMC have become concerned not just about inflation remaining too high but that there are "downside risks to economic growth." One participant even wanted the FOMC statement to reflect more symmetrical risks rather than just inflation. According to the minutes, this member's view was that "although the risks to inflation remained the predominant concern, the statement should emphasize that policy could be adjusted in either direction depending on the evolution of the outlook for inflation and economic growth."
The markets should see these points in the minutes as merely the beginning of any potential transition in policy. Before the Fed eases, the statement and minutes will first reflect language of reduced or minimal risks of inflation remaining too high. The FOMC clearly still sees inflation as the higher risk. Language remains regarding concern over labor markets that are too tight. Nearly all members see core inflation as "uncomfortably high." However, the overall consensus remains that the economy over the near term will post growth rates just below potential and that core inflation will ease. The minutes reflected that the Board's staff forecast continued to call for such moderation in economic growth and eventually in core inflation.
The next FOMC meeting is scheduled for two days, January 30 and 31.
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