FOMC minutes to show the Fed getting more “confident”

June FOMC meeting says the hurdle for a lift-off in rates is quite low, but the pace will be very gradual. The FOMC's 1.9% growth forecast for this year implies average growth of 2.5% during Q2-Q4 and according to the "dots" this is good enough for at least one rate hike. 

Yellen communicated this during the press conference, insisting the rates are not on a pre-set course and the path will be adjusted as the data evolves. The speed of the tightening cycle as being tied to the labor market and inflation.

The unemployment rate might eventually drop to about 4.3% by the end of this cycle, rather than leveling off at 5.0% as suggested by the FOMC's projections. Alongside this projected unemployment drop, an acceleration in hourly wage growth is also expected to 2.6% by the end of this year and 3.0% by the end of 2016.

Things to look for in the FOMC minutes include any additional color on the timing of the lift-off and any discussion on how to communicate ahead of the first rate move. On the first issue, any precise commitment is not expected, but it would be helpful to see whether the one-hikercamp which includes dots #3 through #7 assumes the first rate hike in December or before. 

A September hike followed by a six months pause is expected, which would allow the market to slowly adjust to the new reality of a tightening cycle. Regarding the communication ahead of the lift-off, the April minutes already included a discussion on the issue but most participants seemed uncomfortable with the idea of pre-annouoncing the liftoff.

Lastly, technical aspects of the lift-off are considered, specifically the size of the overnight reverse repo facility (ON RRP), says Societe Generale.