Fed: The Minutes

The minutes of the March 17-18 FOMC meeting were released yesterday. The key point was that Fed officials were split on whether to start raising interest rates in June:

Several participants judged that the economic data and outlook were likely to warrant beginning normalization at the June meeting. However, others anticipated that the effects of energy price declines and the dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016.

The trade-weighted dollar was mentioned 9 times, up from 7 times in the previous minutes.

Yesterday, in an interview with Reuters, FRB-NY President Bill Dudley said the Fed could still hike rates in June despite a weak start to the year, if economic data pick up over the next two months:

I could imagine circumstances where a June rate hike is still in play. If the next jobs report is strong...if second-quarter GDP look like it is bouncing quite sharply.

He said there were still good reasons for the Fed to hold off on liftoff to make sure as many workers as possible are pulled into the labor force. In addition, the weak first-quarter data and recent weak jobs report mean “the bar is probably a little bit higher” for a June hike. Seems to me that Dudley has too much free time.

(Based on an excerpt from YRI Morning Briefing)