If you were looking for one last look at what the Federal Reserve was and may still be thinking about when to raise interest rates, the Minutes of the September 16 to 17 FOMC meeting have been released.

A quick hit view of this would show that the Fed is still leaning toward a Fed Funds rate hike at the end of 2015. The Fed discussed how the markets were perceiving their rate hike timing. One key difference here is how much of the then-current volatility in financial markets and weakening economic reports were coming out of China. These two issues really felt like the prevailing theme, almost like market volatility and Chinese economic instability became the third and fourth Fed mandates behind full employment and a 2.0% inflation target.

24/7 Wall St. does not want to give the minutes any extra attention. Our take is that they are not deserving of further attention, mainly because they are just one more chance for the Federal Reserve to give the market one last look at “what they really meant” at that time.

We have heard more and more hawkish and dovish Fed speeches since the last meeting concluded three weeks ago. Below is a hand-selected portion of the full minutes, taken verbatim from the minutes, as follows:

• Domestic financial conditions tightened modestly as concerns about prospects for global economic growth, centered on China, prompted an increase in financial market volatility and a deterioration in risk sentiment during the intermeeting period.
• Tighter financial market conditions and greater volatility contributed to a reduction of the odds that market participants appeared to place on the first increase in the federal funds rate occurring at the September FOMC meeting and to a flatter expected path for the policy rate thereafter.
• Over the intermeeting period, the concerns about global economic growth and turbulence in financial markets led to greater uncertainty among market participants about the likely timing of the start of the normalization of the stance of U.S. monetary policy.
• Based on federal funds futures, the probability of a first increase in the target range for the federal funds rate at the September meeting fell slightly; the probabilities attached to subsequent meetings through January 2016 were generally little changed and rose for meetings later that year.
• Similarly, results from the Desk’s September Survey of Primary Dealers and Survey of Market Participants indicated that, on average, respondents pushed out their expected timing of the first increase in the target range for the federal funds rate.
• Regarding the most likely meeting date for the first rate increase, survey respondents were about evenly split between September and December.
• Data on overnight index swap rates indicated that investors marked down the expected path of the federal funds rate, on balance, over the intermeeting period.
• Participants discussed the potential implications of recent economic and financial developments abroad for U.S. economic activity and inflation. A material slowdown in economic growth in China and potential adverse spillovers to other economies were likely to depress U.S. net exports to some extent. In addition, concerns associated with developments in China and other emerging market economies had contributed to a further appreciation of the dollar and declines in prices of oil and other commodities, which were likely to hold down U.S. consumer price inflation in the near term.
• During their discussion of economic conditions and monetary policy, participants indicated that they did not see the changes in asset prices during the intermeeting period as bearing significantly on their policy choice except insofar as they affected the outlook for achieving the Committee’s macroeconomic objectives and the risks associated with that outlook. Many of them saw the likely effects of recent developments on the path of economic activity and inflation as small or transitory.
• Most members agreed that their confidence that inflation would move to the Committee’s inflation objective would increase if, as expected, economic activity continued to expand at a moderate rate and labor market conditions improved further. Many expected those conditions to be met later this year, although several members were concerned about downside risks to the outlook for real activity and inflation.

And on Mr. Lacker’s dissenting vote, the minutes said:

Mr. Lacker dissented because he believed that maintaining exceptionally low real interest rates was not appropriate for an economy with persistently strong consumption growth and tightening labor markets. He viewed current disinflationary forces as likely to be transitory, and was reasonably confident that inflation would move toward 2 percent. In his view, further delay in removing monetary policy accommodation would represent a risky departure from past patterns of FOMC behavior in response to such economic conditions.

FULL FOMC MINUTES

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