The Fed’s Minutes

Sunny Weather Forecast

Economists and traders pay a lot of attention to something that probably doesn’t keep you up at night: the FOMC Minutes, or, in English, the summary of the discussion among decision-makers on the Federal Reserve Board, known as the Federal Open Market Committee.

What do they discuss? The health of the U.S. economy, the prospects for inflation, and whether interest rates should be raised or lowered. The latter issue, of course, is the reason for all the fuss; traders want to know if rates are going to go up faster than people expect, which might slow down the economy and reduce demand for stocks.

Yesterday, the FOMC released the minutes from its late January meeting in Washington, DC, and the news was generally upbeat. FOMC members appear to believe that the U.S. economy has reached full employment and that the core inflation target will be met in a couple of years with no significant concern that it will overshoot that level. You can read the full report here: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20180131.pdf but some excerpts show how sunny is the forecast among these economic weathermen:

“Participants characterized their business contacts as generally upbeat about the economy; their contacts cited the recent tax cuts and notable improvements in the global economic outlook as positive factors. Manufacturers in a number of Districts had responded to increased orders by boosting production….”

“Businesses in a number of Districts reported plans to further increase investment in coming quarters in order to expand capacity….”

“Many participants reported that labor market conditions were tight in their Districts, evidenced by low unemployment rates, difficulties for employers in filling open positions or retaining workers, or some signs of upward pressure on wages…”

“Business contacts in a few Districts reported that they had begun to have some more ability to raise prices to cover higher input costs.”

Of course, the markets dove at the end of the following day, and one interpretation of the minutes is that the Fed will tighten rates faster and more often than had previously been reported. That would be a negative for stocks, but it’s also pure speculation; all the Fed decision-makers promised was “further gradual tightening,” which is ambiguous enough to fit anybody’s interpretation. The most balanced way to read the minutes is to take the Fed at its word: it sees a healthy local and global economy and a return to wage prosperity unfolding before its eyes. That doesn’t mean the market can’t go down and stay down, but it does suggest that the economic doomsayers don’t have a lot of fans at America’s central bank.

 

Contributed by Bob Veres

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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