First Realty

Janet Yellen

The Federal Reserve’s June monetary policy meeting was just three weeks ago, but in today’s fast-paced markets, it might as well of been a decade. If you recall, the US central bank shifted its interest-rate expectations (the so-called “dot chart”) lower, but the consensus is still that we’ll have two interest rate increases this year, coming possibly in September and December. For now the FOMC chose not to raise rates at the June meeting, keeping them at the same 0%-0/25% range where they’ve been held since December 2008, and the minutes offered few clues as to when that decision might come.

Much of the focus at the meeting was on projections that economic growth as measured by gross domestic product will strengthen in the second half. The economy contracted in the first quarter even with upward revisions. But that soft patch was widely blamed on temporary factors – bad weather, a West Coast dock strike and a strong dollar that hurt exports

Since that meeting,  a couple of major tremors have hit the global financial system, namely the possible final ultimatum in Greece and China’s precipitous stock market collapse, to say nothing of today’s bizarre technical issues with the NYSE stock exchange.

Traders were almost surely to take today’s minutes with a grain of salt, in light that member comments were already dated. That said, insight from the world’s most important central bank is still worth tuning into and here’s some of the major headlines from the latest FOMC minutes:

  1. CONDITIONS STILL APPROACHING THOSE WARRANTING LIFTOFF
  2. MANY FED OFFICIALS EXPRESSED CONCERN ABOUT GREECE AT JUNE FOMC
  3. SEVERAL OFFICIALS VOICED UNCERTAINTY ABOUT CHINESE GROWTH PACE
  4. OFFICIALS WANTED MORE SIGNS OF STRONGER GROWTH FOR LIFTOFF
  5. A NUMBER OF FED OFFICIALS WARNED AGAINST PREMATURE RATE RISE
  6. ONE MEMBER READY TO RAISE RATES IN JUNE BUT WILLING TO WAIT

At first glance, these headlines seem to be much as the same rumblings we’ve been getting from the Federal Reserve of late.

Most officials want to start normalizing interest rates, but they are wary of the risk of raising interest rates too quickly and would prefer to see more convincing evidence that the economic recovery is accelerating. Several influential entities, including the International Monetary Fund, have called on the Fed to delay raising rates so as not raise borrowing costs around the world and further roil global markets.

Many officials it appears seem concerned about Greece and China as factors favoring holding off before raising interest rates and it’s worth noting that the financial conditions in these two countries have since deteriorated and may play an increasingly large role in US monetary policy as we move farther into 2015.

FOMC members are also remain concerned that inflation isn’t climbing fast enough toward the Fed’s desired goal of a 2% annual rate despite a tightening labor market that’s finally forcing wages higher.


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