Important takeaways from Fed's January get together

Cutting to the chase with the Fed minutes of the FOMC meeting three weeks ago in terms of future policy actions, there was nothing we don’t already know, especially as many Fed members have spoken since that meeting. They don’t know yet when  they will cut rates. I think the big question too right now is the fate of QT and their balance sheet where Jay Powell said at his presser that it will be a topic of discussion at the March meeting.

With respect to the general comments within the minutes, there is always signaling of some sort in terms of where the majority thinking lies. The minutes specify when many, several, some, few… participants agree on something. ‘Many’ or ‘several’ or even just saying ‘participants’ can be viewed as the majority. To this of relevance with the fed funds rate, “Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent.”

This line though doesn’t sound like a committee that wants to end QT anytime soon even if the reverse repo facility heads towards zero but they should at least discuss. “Participants judged that liquidity in the financial system remained more than ample and discussed the importance of considering liquidity conditions as the Federal Reserve's balance sheet continues to normalize.”