The Calm Before … the Minutes

Fedspeak leading up to today’s Federal Open Market Committee (FOMC) meeting had been tilting ‎in a somewhat hawkish direction. But the Federal Reserve left rates on hold, as widely expected, and its post-meeting statement featured minimal changes compared with its December explanation.

Indeed, the only change of note was new language regarding the Fed’s confidence that it “will” reach its inflation target under a policy that gradually reduces accommodation. In past statements, the Fed has said it “expected” inflation to reach the 2% target.

If the goal was to not make news, the Fed succeeded. But I suspect the minimal changes to the statement mask potentially material disagreement among members of the committee on a number of issues: at what point and by what mode to shrink the balance sheet; whether to hike in March or wait for more clarity on the details of U.S. tax and trade policies; and of course on how the trajectory of these polices might change the estimate of the neutral policy rate (if at all).

In three weeks, the Fed will release minutes from today’s meeting. Don’t be surprised if “Fed Minutes Day” turns out to be much more informative – and market-moving – than “Fed Day.”

Richard Clarida  is PIMCO’s global strategic advisor and a frequent contributor to the  PIMCO blog .