Stocks set to extend yesterday's rally ahead of Fed meeting minutes

Stocks set to extend yesterday's rally ahead of Fed meeting minutes

In the minutes, officials described risks that policy moves initiated by the Trump administration could lead to faster than expected economic growth, but could also lead to a stronger dollar and weakness overseas. However committee members' median projection for the fed funds rate was raised slightly to include three rate hikes (one more than before) in 2017 and three more rate hikes in 2018. That surprised investors and helped temper a market rally.

Discussing policymakers' forecasts, the minutes said: "Many participants noted that there was now substantial uncertainty about the size, composition, and timing of prospective fiscal policy changes, but they also commented that a more expansionary fiscal policy might raise aggregate demand above sustainable levels, potentially necessitating a somewhat tighter monetary policy than now anticipated". It is feared that a moved below 4.5% could spur inflation to rise faster than the Fed now projects. That's expected to force employers to bid up wages to attract a smaller pool of available workers, potentially spurring inflation that eventually exceeds the Fed's annual 2% target.

Reflecting the potential for stronger growth in the wake of the election, Fed policymakers signaled after the December meeting that they would enact three quarter-percentage-point increases this year.

"At this meeting, members continued to expect that, with gradual adjustments in the stance of monetary policy, inflation would rise to the Committee's 2 percent objective over the medium term", the report states.

The minutes showed how broadly views within the Fed are shifting in response to U.S. President-elect Donald Trump's promises of tax cuts, infrastructure spending and deregulation.

Minnesota players threaten to transfer after Claeys firing
The Minnesota Golden Gophers won nine games this season, including a surprising win over Washington State in the Holiday Bowl . According to the Star Tribune , the 10 suspended athletes have appeals scheduled with the university this month.

Customs at airports across country experience computer outage
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Gas prices hit highest point of year
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At the same time, Fed policymakers "emphasized their considerable uncertainty" about future economic policy changes.

Nearly all of the rate setters said the risks of growth overtaking the FOMC's forecasts had grown because of the possibility of the Trump stimulus plans, while the key theme was the even greater-than-usual degree of uncertainty over the outlook for growth, inflation, and interest rates. In the September meeting, they were anticipating two rate hikes.

At that meeting, the Federal Open Market Committee nudged up the interest rate for the first time in a year and just the second time in more than a decade.

"Yesterday we had a confluence of factors that led to higher yields: we had strong inflation numbers from overseas; we had oil starting to rally", said Subadra Rajappa, head of USA rates strategy at Societe Generale in NY.

December meeting minutes were realised last night and the inflation hawks are looking very German indeed, as teeth are gnashed on the upcoming Trump fiscal stimulus.

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