FOMC minutes: Nothing new - BBH

Analysts at BBH do not see much new news in the FOMC minutes as the January meeting was seen in real time as a hawkish hold and the statement reflected an upgraded economic assessment and greater confidence that inflation would move toward target.  

Key Quotes

“It seems clear that the fiscal stimulus helped boost the near-term confidence.  Much attention has been devoted to debating whether the March dot plots will point to four hikes this year instead of three, which was the case in December.  However, the simple fact is that the Fed funds futures are not fully pricing in three hikes this year.  That gap between the market and the Fed is closing gradually, but remains and it is that adjustment that seems key for the investment climate.”

“We have argued that there is an accumulation of evidence that the US economy is showing some classic sign of being late in the expansion cycle.  These include metrics like the 12-month moving average of non-farm payrolls, auto sales, credit card delinquencies, and financial speculation (cyber-currencies?).  The eurozone economy in contrast was seemingly accelerating.  However, after softer PMIs, Germany reported softer ZEW and weaker IFO surveys, and France saw all its February business confidence readings decline in February.  Of note, the German IFO expectations component fell the most in two years (105.4 from 108.3) and is at its lowest level in five months.”