The
document, due at 2 p.m. EST (1900 GMT), will provide an
accounting of the Jan. 25-26 meeting, in which policymakers
agreed that it would "soon be appropriate" to raise the Fed's
benchmark overnight interest rate from its near-zero level, and
also engaged in extensive discussion about the future of nearly
$9 trillion in securities held by the central bank.
Debate around both topics and the range of views expressed about
the severity of the ongoing inflation surge and other economic
risks may hint at just how aggressive the Fed plans to be in
tightening monetary policy, and in particular how likely it is
to inaugurate a round of rate hikes in March with a
half-percentage-point increase in its target rate.
Investors currently expect the Fed to take that step instead of
sticking with the more cautious quarter-percentage-point
increase it typically prefers.
Citi analyst Andrew Hollenhorst noted that Fed Chair Jerome
Powell, in his post-meeting news conference last month,
"declined to take the potential for a 50 (basis point) hike at
some point off the table."
If the minutes reflect "this all-options-on-the-table policy
approach, that may be read as consistent" with the larger and
faster set of rate increases currently anticipated by investors,
Hollenhorst wrote.
Since the beginning of this year investors have steadily
increased how much they expect the Fed to raise rates, and
currently anticipate that it will increase the target rate by
between 1.50 and 2.00 percentage points by year's end - the
equivalent of a quarter-percentage-point increase at each of its
remaining seven policy meetings in 2022.
Though the minutes are backward-looking, they are still likely
to show in broad stokes how policymakers are thinking about the
economy's evolution and how sensitive they are to incoming data.
Reports since then have, if anything, heightened the sense of
inflation risk. The economy appeared to skirt much of the
expected impact from a winter surge of coronavirus cases. U.S.
employers added 467,000 jobs in January, far more than expected,
and wages grew. The most recent inflation data showed no sign of
easing from the current 40-year high.
Policymakers last month also discussed plans to trim the Fed's
asset holdings in coming months, and the minutes may provide
even more details about those discussions, which Powell said
would likely be completed over the course of the policy meetings
in March and May.
Last month, the Fed issued a set of broad principles for
reducing its holdings of U.S. Treasuries and mortgage-backed
securities. Policymakers must now pin down the specifics of how
much of a reduction to allow each month, and when to begin the
"runoff."
(Reporting by Howard Schneider; Editing by Paul Simao)
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