After Powell’s ‘reassuring’ hawkish speech, following the briefly dovishly-interpreted Fed statement, all eyes are back on the FOMC Minutes today to see just how assuredly The Fed will stick to its 25bps-per-quarter trajectory, come hell (stock crash) or high water (inflation).

The labor market (judged by the unemployment rate) has rarely been lower and inflation is right at The Fed’s mandated goal so the biggest focus will be on any neutral rate discussions (see chart below on Fed rate trajectory) and any discussions of the potential for inverting the yield curve.

As Bloomberg Chief U.S. Economist Carl Riccadonnanoted

“The Sept. 25-26 FOMC meeting predated much of the recent volatility in financial markets. At the meeting, the broad majority of officials signaled a preference for an additional rate increase in December. Fed watchers will scrutinize the minutes for sources of vulnerability regarding policy makers’ collective conviction — the extent of inflation weakness or tightening of financial conditions — that could lead them to consider either a near-term pause or a slow trajectory of hikes next year”.

If Powell’s PR is anything to go by, the Minutes should be pitched hawkish…and it appeared to do so:

 A Number of Officials Saw Need to Hike Above Long-Run Level

“A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level”.

The Fed is worried about asset bubbles…

“Some participants commented about the continued growth in leveraged loans, the loosening of terms and standards on these loans, or the growth of this activity in the nonbank sector as reasons to remain mindful of vulnerabilities and possible risks to financial stability.”

The Fed does not see the use or removal of the word “accommodative” as a signal:

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