The minutes from the FOMC meeting held in April revealed that the FOMC is more divided than we previously thought. In general, the FOMC members agreed that the labour market continues to strengthen, weak GDP growth in Q1 was likely a transitory dip and financial conditions have eased. But the agreement ended there.
The minutes state that while 'several FOMC participants' thought that risks are 'roughly balanced', 'many others' continue to see 'downside risks'. Also, on inflation the FOMC members disagreed. While 'several continued to see important downside risks to inflation' from low inflation expectations, 'many' thought the recent developments 'provided greater confidence that inflation would rise to 2 percent'. So clearly we have a fight between 'several' and 'many', leaving some confusion on how to interpret the Fed.
Interestingly, 'most participants' judged that it would be 'appropriate' to hike in June if 'incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress'. On the surface this could look like a clear intention to hike in June but then the minutes state that 'several participants were concerned that the incoming information might not provide sufficiently clear signals to determine by mid-June whether an increase in the target range for the federal funds rate would be warranted.'
To read the entire report Please click on the pdf File Below