Key highlights from FOMC minutes

Minutes of January meeting released yesterday provided vital glimpse to FOMC policymakers' thinking regarding US monetary policy. Though immediate market reaction has been relatively mute, since the wordings were in line with expectations.

Key highlights 

• As of January, many Federal Reserve officials saw an increase in downside risks to the outlook of US economy as well as inflation, mainly stemming from financial market turmoil, weaker oil price and weakness in global economic activity outside United States.
   
• Despite their assessment of increased risks and tighter financial condition most of the participants felt it to be till premature to judge the impact and how long the tighter conditions may persist. According to the most, further assessment is required to judge impact, especially in the medium term.
   
• FOMC members seem to be a bit worried over consumer spending, since subdued spending is not in line with increase real income, thanks to wage growth and lower oil price. Increase savings rate indicate, consumers could be worried over economic outlook. However policymakers are hopeful of stronger rebound this year.
   
• Regarding inflation, most of the policymakers anticipate, inflation to pick up once the impact of lower oil price and stronger Dollar dissipate.
   
• Broader economic impact due to slowdown in China and other emerging market economies, is what policymakers are worried over since direct exposure of US is small.
   
• Though current financial market turmoil might lead to tighter conditions in US, FED policymakers believe they are not in line with fundamentals of US economy and regarding drop in equity prices as correction in line with historic equity valuations.
   
• Policymakers reiterated that monetary policy adjustment would be gradual and data dependent.