Investor preview: Assessing the FOMC minutes for June 2014
The FOMC minutes for the Fed’s meeting on June 17–18
The Fed usually releases the minutes of its Federal Open Market Committee, or FOMC, meetings about three weeks after each meeting. While a press conference and statement usually follow each FOMC meeting, a more detailed account of the FOMC comes from the meeting’s minutes. Both stock (OEF) and bond (BND) investors keenly watch for these minutes. The minutes give you clues to the Fed’s future monetary policy and the path of the Fed funds rate.
This week, on Wednesday, July 9, the Fed will release the minutes for the FOMC meeting that took place on June 17–18.
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Key takeaways from the April FOMC minutes release
At its April FOMC, the Fed’s main focus was as follows.
- It continued to taper of longer-term Treasuries (TLT) and agency-backed securities at the present pace. The Fed cut its monthly purchases of both by $5 billion per month.
- It assessed strategies to normalize the Fed’s $4 trillion-plus balance sheet and a mechanism for future increases in the Fed funds rate. This included interest on excess reserves, reverse repurchase agreements, and the term deposit facility.
- The Fed also discussed the economic situation and outlook.
What can investors expect at this month’s FOMC minutes release?
- The minutes show tapering of longer-term Treasuries (TLT) and agency-backed securities by a further $5 billion each per month. The Fed’s minutes may also show you the rationale for revising quarterly economic estimates, commonly known as the “Summary of Economic Projections” or SEP, which it released along with the June FOMC statement. GPD forecasts for 2014 were revised downwards. So were projections for the unemployment rate. The inflation forecast for 2014 was revised slightly upward, from 1.5%–1.6% in March to 1.5%–1.7% in the June projections.
- The Fed is also likely to discuss its strategies for normalizing and their impact on financial stability and the overall economy.
Another key report
In the next part of this series, we’ll discuss another major economic report from the U.S. Federal Reserve. This will come out on Tuesday, July 8. It will affect bond markets (BOND). Please read on to learn more.