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Stern Options Analysts Provides Three key Points to Watch in the Minutes of the Fed Meeting

Thursday, October 13, 2016 6:16
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No one knows for certain when the U.S. Federal Reserve will raise interest rates. In fact, it is safe to assume that individual Fed officials don’t know when they’ll raise interest rates because they can’t seem to agree on the factors that should support the rate hike decision. Nonetheless, the minutes of the Federal Reserve September policy meeting will soon be released.

The U.S. economic outlook currently hangs in a balance because the market bulls and market bears are both vocal about where they think that the economy is headed. However, the uncertain economic outlook provides a unique opportunity for traders to profit from Binary Options and future market. Stern Options analysts think the following key points of the minutes can provide insight into the Fed’s plan for interest rates going forward while helping traders and investors to make informed decisions.

Impact of politics on the rate hike decision

The U.S. Presidential election is almost here and it seems that Hillary Clinton might emerge as the winner based on ratings from the polls. The Fed has been in the crosshairs recently with Republican candidate, Donald Trump accusing the fed of false economy. The minutes of the September meeting will show if there’s any substance to Donald Trump’s accusations.

Of course, Fed Chair, Janet Yellen has refuted Trump’s claim that the fed filled with psychopaths who are playing politics with the economy. In her words, “partisan politics plays no role in our decisions about the appropriate stance of monetary policy… you will not find any signs of political motivation when the transcripts are released in five years.” 

Nonetheless, the Fed would surely have considered the possibility that political uncertainty could influence the markets and the fed would have factored that possibility into the deliberations. Going forward, the fed would most likely try to avoid the subject of politics in their deliberations in order to avoid being accused of playing partisan politics.

Division on rate hike

It is no longer news that the Fed is divided on the rate hike decision. Some fed officials think that the economy is ripe for an increase in Interest rate while some other officials think that the rate hike decision should be delayed. For instance, Fed vice Chair, Stanley Fischer supports a dovish stance to keep rates steady. However, Eric Rosengren (Boston), Loretta Mester (Cleveland), and Esther George (Kansas) favor a hawkish stance that will raise rates immediately.

Analysts believe that the minutes of the September meeting might reveal the fault lines for division among fed officials.  Fed officials in support of a rate will most likely submit that inflationary trends are rising and that the economy is near full employment. Officials in the dovish camp will submit that the economic growth is still fragile and that a rate hike could spook the markets.

It would be interesting to see how both camps frame their arguments and the most logical argument will determine how the Fed will act on Interest rates.

Potential timing of rate hike

Analysts also believe that the minutes of the September meeting can provide insight into the potential timing of the next rate hike. In the policy statement after the September meeting, Fed Chair Janet Yellen maintained that the current economic outlook makes a strong case for raising interest rates; yet, the fed thinks it is better to err on the side of caution “for the time being.”

Wall Street will be dissecting the minutes of the rate hike with a view to knowing the salient details of the feds internal discourse on the timing of the rate hike. Of course, the market has a tacit understanding that the Fed won’t raise interest rates during its November meeting, which holds a week before the U.S. presidential elections.  Nonetheless, you would do well to check the minutes to see if the Fed is leaning towards a December rate hike or if the fed will stay put until 2017 before it raise the Interest rate.

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