Patience Is A Virtue, Unless It’s Not

Amusing Headlines

It’s amusing watching headlines of expectations and how things actually pan out.

• Yesterday MarketWatch reported Fed Minutes Could Show Growing Impatience With ‘Patient’.
• Today MarketWatch reports U.S. Dollar Sinks as Fed Minutes Surprise.
• Today MarketWatch also reports Treasury Yields Drop as Fed Says It’s in No Rush to Hike Rates.

Fed Minutes of January 27-28 Meeting

Lets dive into the Minutes of the Federal Open Market Committee, January 27-28 2015, released today. 

 Participants discussed the communications challenges associated with signaling, when it becomes appropriate to do so, that policy normalization is likely to begin relatively soon while remaining clear that the Committee’s actions would depend on incoming data. Many participants regarded dropping the “patient” language in the statement, whenever that might occur, as risking a shift in market expectations for the beginning of policy firming toward an unduly narrow range of dates. As a result, some expressed the concern that financial markets might overreact, resulting in undesirably tight financial conditions.

Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. However, if incoming information indicates faster progress toward the Committee’s employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.

When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.“