Having hiked in June amid gravely disappointing macroeconomic data, all eyes are now on the minutes for inflation (weakness blamed on “idiosyncratic factors”), labor market (concerns about “sustained employment undershoot”), balance sheet normalization (Fed “divided” over when to start), and market valuation concerns (“equity market high on standard metrics”). Rate hike odds for Sept (22%) and Dec (56%) were rising into the release.

Additional headlines…

As Bloomberg Intelligence noted, financial stability concerns appear to be very high on policymakers’ radar and seem to be pushing the Fed’s hand to continue to gradually tighten policy.

Some participants suggested that increased risk tolerance among investors might be contributing to elevated asset prices more broadly;

a few participants expressed concern that subdued market volatility, coupled with a low equity premium, could lead to a buildup of risks to financial stability.

As for the balance sheet, a September kickoff for the program is what traders widely expect. Any delay may affect calculations on the next rate hike (expected in December) and it may signal the Fed is worried about roiling markets, which ironically, may roil markets.

“A few of these participants also suggested that a near-term change to reinvestment policy could be misinterpreted as signifying that the Committee had shifted toward a less gradual approach to overall policy normalization.”

“Several preferred to announce a start to the process within a couple of months,” the minutes showed. “Some others emphasized that deferring the decision until later in the year would permit additional time to assess the outlook for economic activity and inflation.”