Inside the Fed’s September Meeting: The Annotated Minutes

In September, the Federal Reserve maintained plans for a third interest rate increase in 2017; in October, it announced the start of its program to shrink its balance sheet.

What will it take for officials to follow through with further monetary tightening? This afternoon, with the release of minutes from the September meeting, we’ll get some clues.

Fed Chair Janet Yellen has said stubbornly below-target inflation is a mystery but doesn’t want to wait for a big pickup in price pressures before raising rates again. Other Fed policy makers appear more reluctant to keep withdrawing monetary stimulus without more making more progress toward the central bank’s inflation goal. Ahead of the minutes, Chicago Fed President Charles Evans noted that he is  “really nervous” about low inflation expectations, adding that it was too early to make a call on December.

The implied odds of an interest rate hike by year end have swelled to more than three in four since Yelllen made a relatively hawkish speech week after the September decision.

As always, monetary policy makers’ thoughts on financial markets will be closely parsed by investors.

“The most important hawkish or dovish message” from the September minutes “will be the extent to which officials indicate a further hike in 2017 (and the three hikes implied by the median dot in 2018) remains dependent on a pick-up in inflation,” wrote Andrew Hollenhorst, head of U.S. economics at Citigroup. “Separately, we are interested in whether stretched valuations in financial markets are becoming more of a focus for Fed officials."

The minutes come as debate rages over who will become the Fed chair when Yellen’s term ends on Feb. 3.

Follow along as we annotate the minutes.