The minutes of the November 1 meeting of the Federal Open Market Committee are now public record, and they contained this tidbit about the future of the measured pace formulation:
In their ongoing discussion of the Committee's communication strategy, participants expressed a variety of perspectives about how the policy statement issued at the end of FOMC meetings might evolve over time. Several aspects of the statement language would have to be changed before long, particularly those related to the characterization of and outlook for policy. Possible future changes in the sentence on the balance of risks to the Committee's objectives were also discussed. Participants noted that any forward-looking elements of the statement should clearly be conditioned on the outlook for inflation and economic growth. For this meeting, members concurred that the current statement structure could be retained, as it accurately conveyed their near-term economic and policy outlook.
Looking toward a change in language is certainly understandable in light of this (from Bloomberg):
Federal Reserve policy makers discussed the need "before long'' to change their outlook for the benchmark U.S. interest rate, with some worried about the risk of raising it too much, minutes of their Nov. 1 meeting showed.
Some members of the rate-setting Federal Open Market Committee "cautioned that risks of going too far with the tightening process'' may eventually emerge. The report was released today in Washington.
That prompted this, from Reuters:
"If the Fed is going on hold, it's a big positive," said Mark Bronzo, managing director of Gartmore Separate Accounts LLC.
The Nov. 1 minutes showed that some members of the Federal Open Market Committee "cautioned that risks of going too far with the tightening process could also eventually emerge."
Not so fast though:
After the closing bell, Jeffrey Lacker, the president of the Federal Reserve Bank of Richmond, said it was too soon to declare the U.S. central bank's campaign of interest-rate increases was over. He also said inflation remained a risk amid solid growth, echoing concerns revealed in the Fed's minutes.
"It looks like we're weathering the energy shocks pretty well, but it is too soon to declare us out of the woods," Lacker said.
Nonetheless, the equity markets liked what they read. From MarketWatch:
Stocks closed sharply higher Tuesday, with Dow component Intel Corp. advancing more than 3%, after new Federal Open Market Committee meeting minutes showed some members are worried about excessive rate tightening...
What caught the market's attention is a comment that some FOMC members believe the Fed should be alert to the fact that they may raise rates too aggressively at some point in the future and that this might affect economic growth," said Michael Sheldon, chief market strategist at Spencer Clarke.
"This comment is the first time FOMC members have provided any hint that they may be moving closer to the end of the current rate tightening cycle," he added.
The bond market was pleased too. From CNNMoney:
Treasury bonds turned higher Tuesday as investors eyed the minutes from the last Fed meeting, which revealed that central bankers were still worried about a possible pickup in inflation but were also eyeing a slowdown in their rate-hiking campaign.
The currency watchers, though, had a little different reaction. From DailyFX:
The dollar is rolling over and as always, it is the Fed’s fault. The market was already reeling from the hawkish comments from ECB officials over the past few days and today, the sell-off in the dollar deepened when some Federal Reserve members warned against going too far with rates during their November 1st meeting.
I guess you just can't please everyone.
UPDATE: Stock Trading Update says "The Fed Blinks," and thinks this is why market participants are "wearing their rally hats." Barry Ritholtz agrees. Edward Hugh complains that the Financial Times can't quite get the story straight.