Fed minutes show inflation will remain below target

According to the most recent released minutes of meeting by the Fed, several officials predict that inflation will remain below the 2 percent target. During the last policy meeting on January 30-31 administered by ex-Fed Chair Janet Yellen, the FOMC (Federal Open Market Committee) decided to keep interest rates unchanged based on expectations. However, the statement was revised which indicates that the Fed is expecting the price to increase this year. The minutes further presents slight difference during the discussion. Moreover, there are some members who feared the faster-than-expected economic tightening due to the growth pace of the economy, which increases inflation.

Since the stocks declined near the correction earlier this month, the investors’ attention is focused on the inflation. While the sell-off somewhat triggered by the news about the higher-than-expected wage growth. But these events were not recorded in the Fed’s minutes. The investors still consider this information as to how FOMC members weigh inflation as well as the rate hike level to cope with it. The meeting started after the completion of Republican tax. While investors continue to assess the impact of fiscal stimulus towards the economic forecasts by the Fed by listing the tax reduction among factors that could possibly bolster economic growth.

The consumer expenditure is also projected to resume its growth along with a stable job market and expansion of household net worth specifically for those who have assets like stocks and houses. Due to these consequences, the Fed updated its description in the number of rate hikes in order to clearly define "further gradual increases."

The estimate of FOMC members on the commonly named dot plot in December indicates an expected three-time rate increase in 2018. Based on the implied probabilities provided by Bloomberg, market players fully believe that the possible first interest raise will be implemented during the meeting on March 20 to 21, along with the first press conference of new Fed Chair Jerome Powell and the released of new economic projections.