Takeaway of “Minutes of the Federal Open Market Committee June 14–15, 2016”
- The manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets during the period since the Committee
met on April 26–27, 2016. – my takeaway: when Fed Committee makes decision, their decision needs to be based on both domestic and foreign financial markets. Only look at domestic markets is not enough. - Market participants’ expectations for a firming of monetary policy at the June
FOMC meeting rose considerably in the middle of the period, largely in response to monetary policy communications, but those expectations subsequently fell
sharply following the release of labor market data for May. – my takeaway: Market had already priced in the monetary policy, so I should have thought about out before the news coming out. - Several of these participants expressed concern that a delay in resuming further gradual increases in the federal funds rate would increase the
risks to financial stability or would raise the potential for overshooting the Committee’s objectives; such an overshooting might require a rapid removal of policy accommodation at some point in the future, which could entail
significant risks for U.S. financial markets and the economy. However, some other participants were uncertain whether economic conditions would soon warrant an increase in the target range for the federal funds rate. – my takeaway: they have different opinions of the future direction. Some of them does not want prolong this low rate period. - it was prudent to wait for additional data regarding labor market conditions as well as information that would allow them to assess the consequences of the U.K. vote for global financial conditions and the U.S. economic outlook. – my takeaway: they are very cautious on future direction. They feel that there are two much uncertainty.
- An additional factor in the Committee’s policy deliberations was the upcoming U.K. referendum on membership in the European Union. Members noted the considerable
uncertainty about the outcome of the vote and its potential economic and financial market consequences. They indicated that they would closely monitor developments associated with the referendum as well as other global economic and financial developments that could affect the U.S. outlook. – my takeaway: they are very cautious on UK referendum, why did I be cautious too? I was so stupid!!!!!!!!!!! I cannot think my wish is also my believe and also the reality. - Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic
outlook as informed by incoming data. – my takeaway: they want to see a more consistent growth and non-volatile environment before they make the move. so with the Brexit, the uncertainty increases significantly, the chance of lifting Fed rate will diminish significantly. - a majority of participants expected that real GDP growth would pick up a
bit in 2017 from this year’s pace, and most expected it to remain at or above their estimates of its longer-run pace in 2018. Participants pointed to a number of factors that they expected would contribute to moderate output growth over the next few years, including a diminution of the drag on net exports from a strong dollar, the continued improvements in household and business balance sheets, accommodative financial conditions, and somewhat more supportive fiscal policy. – my takeaway: they look forward to year 2017 and 2018 than this year for moderate output growth. And the contribution factors are dollar, househould and business balance sheet, financial conditions and fiscal policy.
the minutes is here:
