On the heels of the recent turmoil in global markets, here are the keys to the just-released and surprising Fed minutes.
Keys To The Fed Minutes
August 22 (King World News) – Here is a portion of what Peter Boockvar wrote today as the world awaits the next round of monetary madness: Bottom line to the just released FOMC minutes, they discussed everything. They highlighted trade policy as creating an unknown but it’s an unknown for us all.
“a number of participants indicated that most businesses concerned about trade disputes had not yet cut back their capital expenditures or hiring but might do so if trade tensions were not resolved soon.”
They also discussed the recent slowing in housing transactions due to affordability issues…
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Peter Boockvar continues: They discussed the positives in the economy too, particularly with the labor market:
“Participants noted a number of favorable economic factors that were supporting above trend GDP growth; these included a strong labor market, stimulative federal tax and spending policies, accommodative financial conditions, and continued high levels of household and business confidence.”
On the wage side:
“Many participants commented on the fact that measures of aggregate nominal wage growth had so far picked up only modestly….However, some participants expected a pickup in aggregate nominal wage growth to occur before long, with a number of participants reporting that wage pressures in their Districts were rising or that firms now exhibited greater willingness to grant wage increases.”
Of note on pricing:
“Reports from several Districts suggested that firms had greater scope than in the recent past to raise prices in response to strong demand or increases in input costs, including those associated with tariff increases and recent rises in fuel and freight expenses.”
With the discussion on financial stability from those that commented, they “noted that asset valuations remained elevated and corporate borrowing terms remained easy.”
On the elephant in the room, that being the continued flattening of the yield curve, “several participants” acknowledged that inversions typically occur before recessions but “other participants emphasized that inferring economic causality from statistical correlations was not appropriate. A number of global factors were seen as contributing to downward pressure on term premiums, including central bank asset purchase programs and the strong worldwide demand for safe assets. In such an environment, an inversion of the yield curve might not have the significance that the historical record would suggest.”
Which side is Jay Powell on? That is an important $64k question.
Another bottom line, The Fed will hike rates next month and play it by ear in December. After all, December is still a ways away.
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