Some dovish members see a change in long-term inflation expectations. There has been no progress on understanding the low level of inflation that Yellen called “mysterious” in the past. The majority are still confident that inflation will reach 2% in the medium term. The hawkish group is more concerned a more severe undershoot in the unemployment rate that could lead to a bump up in inflation, resulting in a steeper increase in rate hikes.

The dollar is slightly higher on the news but the moves are not earth-shattering.

The Fed convenes in late January with no press conference and no change expected. Jay Powell takes over in February and will make his mark in March.

Fed minutes background

In the December 2017 meeting, the Fed decided to raise rates as expected. They also left the dot-plot unchanged, implying three rate hikes in 2018. We are now in 2018 and markets doubt the Fed will indeed tighten monetary policy at this pace.

The reasons to be doubtful come from low inflation and also from what we already learned at that meeting: Charles Evans joined Neel Kashkari in dissenting and voting against a rate hike. The big question for the minutes: were there additional dissenters?