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FOMC minutes underlined the discussion around ‘forward guidance’ – Danske Bank

FXStreet (Edinburgh) - Allan von Mehren, Chief Analyst at Danske Bank, assessed yesterday’s FOMC minutes.

Key Quotes

FOMC minutes less hawkish than feared”.

“The tone of the minutes was generally cautious and did not signal an immediate change to forward guidance”.

“Downside risks to growth from slower foreign growth were noted and dampening effects on growth and inflation from a stronger USD also caught attention”.

“The minutes did reveal that the discussion of the forward guidance is heating up as ‘several participants thought that the current forward guidance regarding the federal funds rate suggested a longer period before lift off... than they believed was likely to be appropriate’”.

“But in the end ‘it was emphasised that the current forward guidance for the federal funds rate was data dependent’”.

“The minutes also revealed some fear that a change to forward guidance would be interpreted as a significant change in policy outlook”.

“Another topic was the description of ‘significant underutilisation of labour resources’. It was noted that this ‘characterisation...might have to be changed if progress in the labour market continued’”.

“Since the FOMC meeting the unemployment rate has fallen further to 5.9% from 6.1%, so this characterisation could very well be up for change at the coming meeting on 29 October”.

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