FOMC minutes – assessing the bias

Last night US Federal Reserve released its minutes of October meeting, statement of which clearly changed expectations over hike, bringing it back to December from 1^st quarter next year.

There was not much fireworks over the release, reaction was more or less muted. Nevertheless it provides good glimpse into FED's thinking and to feel how the bias stands.

Key highlights -

• Most participants of FOMC felt that downside risks from economic and financial developments abroad has diminished and feel that risks to domestic economy and labor market broadly balanced, (hawkish bias).
• Net exports to weigh on GDP due to weak foreign activity and Dollar (dovish bias).
• Participants' feel, private domestic demand strong and would support economy (hawkish).
• Participants are more confident over FED's inflation objective and feel the effect of lower oil and stronger Dollar to be temporary. (hawkish)

On the rate hike front -

• Most participants anticipate that rate hike conditions, based on their current economic outlook, could be met by next meeting (clear indication/ very hawkish).
• However, some still feel that data till December would warrant a rate hike, while FOMC as a whole warned that decision will be data dependent. On the pace of future rate rises. (some participants seem to be dovish still).

FED broadly warns again that overall path of hike (which would be gradual) to be of more importance than first hike.

Since most in the market are already with the view that FED would hike in December, Dollar found little fuel to move on.

Dollar index sis currently trading at 99.3, down -0.25%.