The Federal Reserve will be releasing the minutes from the Federal Open Market Committee’s Dec. 15-16 policy-setting meeting at 2 p.m. Wednesday in Washington.
Some of the important points in the minutes include the reasons for the policy makers’ decision after months of speculation to raise the interest rate—ever so slightly--before the end of the year as well as their reasoning for future interest rate hikes in the coming months.
Fed Chair Janet Yellen announced her decision to end the seven-year stretch of near zero borrowing costs at an unscheduled meeting that took place in December and reiterated at a press conference after the meeting that the central bank’s tightening moves would happen gradually, but “future policy actions will obviously depend on how the economy evolves.”
Fed’s Future Decisions
The minutes will also shed some light on the Fed’s internal debate over which priority takes precedence – small increases over a longer period of time or a reliance on current economic reports and analysis to set their course of action.
The Fed’s quarterly economic projections prepared for the December FOMC point to the central bank introducing rate hikes four times in 2016. Federal funds futures contracts, however, suggest market participants believe only two rate increases will happen this year. One analyst sees three-to-five rate increases in 2016 if the economy stays on its projected track.
The minutes will show that the labor market has grown considerably since the 2007 to 2009 recession and unemployment has been halved in the past six years to 5 percent in November.
Also included in the minutes will be data on inflation and how the Fed plans to deal with it. The Fed’s preferred inflation index rose just 0.4 percent in the 12 months through November and many policymakers project that it will pick up another 1.6 percent in 2016 based on either a stabilization of the rising dollar, falling oil prices, or a strengthening in consumer demand. These factors will determine whether the central bank’s criteria for follow-up rate increases are being met.
The minutes should also show if there are any indications that the Fed's balance sheet (around $4.5 trillion from around $900 billion in 2008) will be scaled back.