Fed December 13-14 meeting minute’s summary:

Hawkish Fed December 13-14 meeting minute’s revealed that FOMC members agreed to continue to pay close attention to inflation, global economic and financial trends.

Summary:

  • The vast majority of FOMC members believe that under Trump governance, economic growth is expected to upside risks, because the expected fiscal policy will be more relaxed.
  • About half of the FOMC members incorporated larger fiscal stimulus (infrastructure, tax cuts) into their own expectations.
  • In view of the long-term unemployment rate is lower than the target will lead to higher risk of rising inflation
  • FOMC members stressed that the future financial and other economic policy implementation timing, size and composition of the existence of considerable uncertainty.
  • The vast majority of FOMC members expect the unemployment rate to fall below the normal level for longer periods in the next two years.
  • Many FOMC members said the dollar may continue to rise further inflation.
  • FOMC members agreed to continue to pay close attention to inflation, global economic and financial trends.

The Outlook for Economic Activity

  • The median of participants’ projections (individual) for the growth rate of real GDP was 1.9 percent in 2016, 2.1 percent in 2017, 2.0 percent in 2018, and 1.9 percent in 2019
  • The median of projections for the longer-run normal rate of real GDP growth was 1.8 percent.
  • Most participants projected that economic growth would pick up a bit in 2017 from the current year’s pace and run at or slightly above their individual estimates of its longer-run rate through 2019
  • The median of projections for the unemployment rate in the fourth quarter of 2016 was 4.7 percent, slightly lower than in September.
  • Automakers’ assembly schedules suggested that motor vehicle production would be roughly flat in the near term
  • Broader indicators of manufacturing production pointed toward only modest gains in factory output in the coming months.

The Outlook for inflation

  • In the December SEP, the median of projections for headline PCE price inflation in 2016 was 1.5 percent, a bit higher than in September
  • The median of projections for headline PCE price inflation was 1.9 percent in 2017 and 2.0 percent in 2018 and 2019, unchanged from September
  • Several participants projected that inflation will slightly exceed the Committee’s objective in 2018 or 2019.
  • Some participants attributed the upward shift in projected inflation this year and next to recent data that showed somewhat higher inflation than they had expected.
  • A few saw higher inflation in 2019 in conjunction with somewhat greater undershooting of the unemployment rate below its longer-run normal level.

Appropriate monetary policy

  • All participants saw an increase of 25 basis points in the federal funds rate at the December meeting as appropriate.
  • The median projections of the federal funds rate continued to show gradual increases, to 1.4 percent at the end of 2017, 2.1 percent at the end of 2018, and 2.9 percent at the end of 2019
  • The median of the longer-run projections of the federal funds rate was 3.0 percent
  • A few participants revised up their assessments of the longer-run federal funds rate 25 basis points
  • several participants indicated that recent inflation data and the continued strengthening in labor market conditions increased their confidence that inflation would move toward the 2 percent objective

According to the CME, the federal funds rate futures in the December meeting minutes after the announcement rose slightly, but still not enough to indicate that the Federal Reserve interest rate hike this year will be adjusted, traders still expect the Fed will raise interest rates twice during the year in June and December.

What’s on this week?

Next meetings schedule- Jan/Feb 31-1