Tags: Fed | minutes | FOMC | Yellen

What to Expect From the Fed's Minutes

What to Expect From the Fed's Minutes

Wednesday, 17 August 2016 07:41 AM

With the U.S. economy still running below potential and the rest of the world presenting ample challenges to growth, this week's release of minutes from the Federal Reserve's July policy-making meeting should garner a lot of interest among economists and market participants. I see five areas where the minutes can provide insight into how officials perceive the balance of risks and what actions they might take.

All told, I expect the minutes to portray a U.S. economy strong enough to withstand external headwinds, but still struggling to operate at full capacity and regain its longer-term potential. Although the Fed will stick to a cautious, measured and data-dependent approach, admitting that there are still areas of analytical uncertainty, this will not necessarily mean that it will signal inaction.

There's a growing recognition, at the Fed and elsewhere, that expectations of an even more prolonged period of ultra-low interest rates can undermine the integrity, soundness and effective operation of the financial system. Hence, the Fed will leave the door open for a rate increase in September, and open much wider for December -- in hopes that the country’s policy regime may move away from excessive reliance on the central bank toward a more comprehensive response including more balanced demand management measures, structural reforms to amplify the economy's dynamism, actions to address pockets of over-indebtedness and much better global coordination.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

 

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MohamedElErian
With the U.S. economy still running below potential and the rest of the world presenting ample challenges to growth, this week's release of minutes from the Federal Reserve's July policy-making meeting should garner a lot of interest.
Fed, minutes, FOMC, Yellen
245
2016-41-17
Wednesday, 17 August 2016 07:41 AM
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