Markets shouldn't be too surprised when the minutes of last month's Federal Open Market Committee (FOMC) meeting are released this afternoon, unless there is some change in the U.S. Federal Reserve's tune on interest rates or tapering.
Last month, following the FOMC meeting, Fed Chairwoman Janet Yellen was dovish on interest rate talks. She surprised no one when she announced that the Fed would continue to roll back its bond-buying program. The S&P 500 was up a very modest 0.7% on the day.
Today, consistent with Fed guidelines, the minutes of that meeting will be released. Investors can expect a lot of talk about the health of the economy, as well as expectations and forecasts, but Money Morning's Chief Investment Strategist Keith Fitz-Gerald said the most important thing to look out for is "whether or not Yellen deviates from anything she's said to date."
"That's what's going to have a material effect on the markets," Fitz-Gerald said.
This was the case following Yellen's remarks following the March meeting when she said interest rates could spike from its near-zero figure six months after the end of tapering, expected in December. This pushed forward the timeline that many had expected for rate increases and startled investors, triggering a more than 100 point drop in the Dow Jones Industrial Average on the day.
The Fed's Shaky Track Record on the Economy
But other than that, the minutes will be awash in the Fed's economic discussions and projections - data Fitz-Gerald said he doesn't "place a lot of credence on."
"The Fed has been wrong about every indicator it has ever looked at for the last 20 years," Fitz-Gerald said, "but especially in its take on the economic health of the United States since the financial crisis started."
Yesterday, Richmond Federal Reserve President Jeffrey Lacker - who, in contrast to Yellen, is a hawk on Fed policy when it comes to interest rates and bond purchases - gave a speech in Charlotte, N.C., though he gave no indication as to where he sees interest rates going and when, and was just as muted on inflation expectations.
"At some point the economy will have improved enough that banks could increase lending substantially, leading to rapid deposit growth and mounting inflationary pressures," Lacker said. "In order to prevent those pressures from emerging and to keep inflation averaging 2 percent, we will need to begin withdrawing monetary stimulus at the appropriate time. One way to do that is to begin raising interest rates."
Watch for the FOMC meeting minutes to be released at 2 p.m. EDT today.
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