FOMC minutes preview: what it would take for a pause in the hiking cycle? - Nomura

Analysts at Nomura offered their preview of the FOMC minutes.

Key Quotes:

"The post-meeting press conference for the 19-20 September FOMC meeting highlighted the significant degree of uncertainty among FOMC participants about the causes of recent soft inflation. However, Chair Yellen sounded relatively hawkish on the short term during the Q&A session, indicating that while the weakness may not be well-understood, it should not be the cause to put off a hike in December.

We expect the minutes from the September meeting to reflect the amount of debate among participants about recent inflation weakness. However, there will likely also be some debate surrounding the FOMC’s evaluation of financial conditions and asset prices. At the post-meeting press conference, Chair Yellen stated that “sometimes movements, upward movements and asset prices can, for example, reflect a change in market participants, a reduction in market participants' estimates of the longer-run level of interest rates.” This is a view previously shared by St. Louis Fed President Bullard but contrasts with previous statements by New York Fed President Dudley. Thus, the minutes could shed further light on this discussion.

In the “dot plot” for the September meeting, the number of participants expecting no further hikes this year was unchanged from the June meeting (at four). However, the minutes will likely show how comfortable participants are with their forecasts, or what it would take for a pause in the hiking cycle. While the Committee expressed a willingness to look through noisy data due to hurricanes over the next few months, the weak PCE inflation reading for August, which likely cannot be attributed to hurricanes, could be a concern."