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If you want to know the key highlights of the 25-page minutes of the March FOMC meeting, then this write-up is just for you!

1. Two wanted a rate hike, but only one voted

The minutes of the FOMC meeting revealed that a “couple of participants” were arguing for a 25 bps rate hike during the meeting, “citing evidence that the economy was continuing to expand at a moderate rate despite developments abroad and earlier volatility in financial conditions, continued improvement in labor market conditions, the firming of inflation over recent months, and the apparent leveling-off of oil price.”

These participants argued that if the Fed won’t hike rates soon, there’s a chance that it “could economic and financial strain” in the future, as the economy and/or inflation overshoots and the Fed has to raise rates at a much faster pace.

As for who these two hawks were, we know that Kansas City Fed President Esther L. George was one of them. After all, she did vote for a rate hike then and there since “she believed that monetary policy should focus primarily on progress toward the Committee’s longer-run objectives” rather than on global developments.

FOMC Statement: Voting Record
Source: The Federal Reserve

But with regard to the other hawk, we can only speculate.

There have been several Fed officials who were present during the FOMC meeting and who have recently expressed their hawkish sentiment, including Atlanta Fed President Dennis Lockhart, Philadelphia Fed President Patrick Harker, San Francisco Fed President John Williams, and St. Louis Fed President James Bullard. However, only Bullard was a voting member.

And I’m willing to bet that it wasn’t Bullard since he voted to keep the federal funds rate steady.

>2. Fed is focused on global developments

If you were able to read up on my write-up about the 3 Things You Should Know about the March FOMC Statement, then you may still recall that the FOMC members downgraded their growth and inflation expectations and that they blamed global developments for that (the minutes also added the “persistently high exchange value of the dollar” and “tighter financial conditions”).

FOMC Statement: Economic Projections

Well, it turns out that the Fed is REALLY focused on global developments. The members generally agreed that the U.S. economy was “resilient to recent global economic and financial developments,” so no problems on the domestic front… for now at least.

However, most of the members “saw foreign economic growth as likely to run at a somewhat slower pace than previously expected, a development that probably would further restrain growth in U.S. exports and tend to damp overall aggregate demand,” which could lead to deflationary pressures.

In addition, many FOMC members agreed that a global slowdown may cause business investment to remain sluggish, according to the minutes.

Furthermore, “several participants expressed the view that the underlying factors abroad that led to a sharp, though temporary, deterioration in global financial conditions earlier this year had not been fully resolved and thus posed ongoing downside risks.” Fed officials are, of course, talking about China, particularly the Chinese stock market meltdown at the start of the year that dragged global equities lower.

Several” are cautious about hiking rates in April

Fed officials decided to maintain the federal funds rate during the March meeting, but that’s A-okay since there’s going to be another FOMC statement this coming 27th of April.

So, what are the chances of a rate hike then? Well, probably not too good. Here are the particulars from the FOMC meeting minutes:

“A number of participants judged that the headwinds restraining growth and holding down the neutral rate of interest were likely to subside only slowly. In light of this expectation and their assessment of the risks to the economic outlook, several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate. In contrast, some other participants indicated that an increase in the target range at the Committee’s next meeting might well be warranted if the incoming economic data remained consistent with their expectations for moderate growth in output, further strengthening of the labor market, and inflation rising to 2 percent over the medium term.”

So, there are “several” members who are cautious about hiking rates in April, but there are “some” who are willing to hike rates. However, their willingness to commit to an April rate hike would depend on the data. Hmm. Interesting.

4. “Several” are cautious about rate hikes in general

Just as interesting (if not more so) is the fact that “several” Fed officials are cautious about hiking rates altogether. Here are the relevant details of the FOMC meeting minutes:

Several participants also argued for proceeding cautiously in reducing policy accommodation because they saw the risks to the U.S. economy stemming from developments abroad as tilted to the downside or because they were concerned that longer-term inflation expectations might be slipping lower, skewing the risks to the outlook for inflation to the downside. Many participants noted that, with the target range for the federal funds rate only slightly above zero, the FOMC continued to have little room to ease monetary policy through conventional means if economic activity or inflation turned out to be materially weaker than anticipated, but could raise rates quickly if the economy appeared to be overheating or if inflation was to increase significantly more rapidly than anticipated.

So, “several” Fed officials are wary of “reducing policy accommodation,” which is economic-speak for hiking rates, because global risks threaten to drag U.S. inflation lower, which helps to explain why the Fed’s path to tightening is now slower, with room for only up to two rate hikes within the year instead of the projected four rate hikes during the December meeting.

It’s also worth noting that “many” Fed officials are now talking about a hypothetical scenario where they have to ease, given that we’re supposed to be in a tightening cycle now.

To sum it all up, the FOMC minutes revealed that Fed officials are keeping a very close eye on global developments, particularly in China. The minutes also revealed that the Fed is essentially blaming global risks for the downgrades on their economic projections, as well as the slower and more cautious path to tightening.