Comments in the FOMC minutes:
- No direct mentions of tapering in the text but it says this: “A number of participants suggested that if the economy continued to make rapid progress toward the Committee’s goals, it might be appropriate at some point in upcoming meetings to begin discussing a plan for adjusting the pace of asset purchases”
- The staff’s outlook for inflation was broadly unchanged
- Jobs reports suggested that the rate of increase in private employment had slowed somewhat relative to its earlier robust pace
- Foreign headline inflation rose considerably, boosted by temporary factors, such as the fading effects of steep price declines seen early last year and the pass-through of price increases for oil and other commodities. However, underlying inflationary pressures appeared to have remained muted.
- The staff continued to judge that the risks to the baseline projection for economic activity were skewed to the downside and that the uncertainty around the forecast was elevated
- participants generally noted that the economy remained far from the Committee’s maximum-employment and price-stability goals
- Many participants also noted that consumer spending would continue to be bolstered by these factors as well as by the elevated level of accumulated household savings
- Full text
The taper mention is the big thing but ‘some participants’ only saying that it ‘might be appropriate’ if there was ‘rapid progress’ towards the Fed’s goals. That’s hardly screaming for change.
The dollar is getting a bid on the taper talk though. I would fade that because it’s hardly definitive. This market is conditioned to freak out at any mentions of ‘taper’ though and that’s just enough to tip the scales.
At the same time, this move is fairly remarkable and underscores once again the tricky task of tapering. There is hardly a whisper of tapering here and the market is doing a bit of kicking and screaming. That itself will make many Fed members hesitant to actually taper.