A plan is forming with a slow-motion component, and everyone wants to get rid of MBS
In the minutes of the January 29-30 FOMC meeting, published yesterday, the Fed added some tidbits about how it wants to deal with its “balance sheet normalization.” These minutes are always the most mind-numbing repetitive prose available in the English language. They’re clearly designed to not ever be read by a human. So I sorted it out. Here we go.
Not a word about rate cuts; it’s all about hikes:
The Fed put the world on notice that it might remove the newly beloved “patient” when it comes to rate hikes:
Many participants observed that if uncertainty abated, the Committee would need to reassess the characterization of monetary policy as “patient” and might then use different statement language.
And it also discussed rate hikes, when and if, while there was not a word about rate cuts: “Several of these participants argued that rate increases might prove necessary only if inflation outcomes were higher than in their baseline outlook.”