The FOMC minutes were uneventful as they usually are because we always hear from so many Fed members in the time between the meeting 3 weeks prior and the release of the minutes. To bottom line what was said, some will want to hike in June and others don’t seem to want to but there is a general level of confusion on what to do next. “Participants expressed uncertainty about how much more policy tightening may be appropriate. Many participants focused on the need to retain optionality after this meeting.” I don’t think they will hike in June but Fed Governor Waller is committing an economic sin in his policy analysis and revealed today in his speech.
He said “I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective.” Fair and I get that but he then said “whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks.” Well, the data we’re going to get in the next 3 weeks are all backward looking and thus being ‘data dependent’ right now seems more dangerous than not as its making policy on rearview mirror analysis. This is not to say they shouldn’t hike again at some point but I’ll repeat that there is ALWAYS another Fed meeting to act and what has happened since SVB went down has reflected a squeeze going on in the extension of credit that should be prudently watched to see how it plays out. ALSO, and said here again for the umpteenth time, just keeping rates at this high level for a while is a continued form of monetary tightening because all the debt outstanding that is coming due each month is resetting at a much higher rate than that on the maturing loans.