Pascale’s Perspective: Fed’s Minutes Release Conveys Certainty of Liftoff…

By: David R. Pascale, Jr.- George Smith Partners

Today’s release of the October Fed minutes basically confirmed a rate hike at the December meeting. The statement noted that global troubles had eased and that ‘based on their assessment of the current economic situation and their outlook for economic activity, the labor market and inflation, these conditions could well be met by the time of the next meeting’ (speaking regarding conditions that justify a move).

The statement was also bullish on economic conditions. Equity markets rallied, while treasury yields barely moved. Why? Because the markets abhor uncertainty, and the Fed is communicating a consistent message via recent speeches and the official releases. The increase was already ‘baked in’ to yields as they moved after the October meeting itself.

Interestingly, the statement also highlighted the risks of delaying a move, which would create uncertainty and further increase the anxiety and ‘perceived importance’ surrounding the next hike. The Fed realizes that they have to act to maintain credibility. …stay tuned…