FOMC Minutes Preview: Rate pause foreseen

The Federal Reserve will release the minutes of the November 7-8 FOMC meeting on Thursday, November 29th at 2:00 pm EST, 19:00 GMT, when policymakers kept rates unchanged. Back in September, the committee voted 9-0 to raise the Fed Funds target rate 0.25% to 2.00% to 2.25% and is expected to do so again  in December.

Analysis

Federal Reserve Chairman Jerome Powell's speech to the Economic Club of New York on the day before the minutes' release has markets wondering if the Fed is setting the stage for a pause its three-year campaign of rate normalization.

Mr. Powell noted in his written remarks that, “Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth. My FOMC colleagues and I, as well as many private-sector economists, are forecasting continued solid growth, low unemployment, and inflation near 2 percent."  This is considerably different than his characterization on October 3rd that the Fed Funds rate was probably a "long way from neutral." 

If the governors are beginning to see the effects of rate increase in the economy that concern should show up in the minutes. The Fed reveals policy changes by degrees. Mr. Powell's comment on the neutral rate was carefully considered. Markets will be looking for evidence that the committee members see the same economic picture. The discussion of the neutral rate will be telling.  Do the governors have parameters for the Fed Funds being “just below" Mr. Powell's neutral?

Fed minutes are edited. They are part of the policy narrative that the Fed presents to markets and the world. If the Fed is preparing to shift its rate policy to neutral the minutes will second the Chairman’s speech.