The markets had been awaiting that minutes of the March 18 FOMC meeting. Now we have them. The real issue was getting to the bottom of how and why the Fed removed the term “patient” on when it would raise interest rates at the same time that the Fed members also reduced their outlook for GDP and inflation out into 2016 and 2017. The DJIA ticked lower, but then popped back into positive territory in the minutes after the minutes were released.

The nuts and bolts of the outlook are as follows:

Market commentary also highlighted Chair Yellen’s statement at the Monetary Policy Report testimony that the eventual removal of the language in the policy statement noting that “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy” should not be viewed as indicating that the federal funds rate would necessarily be increased within a couple of meetings… On net, the expected path for the federal funds rate implied by financial market quotes shifted up over the period.

Fed governors were dividend about a June timing, and the aim to drop ‘patient’ was to allow a meeting by meeting review period.

Additional Fed notes were as follows:

The information reviewed for the March 17‒18 meeting suggested that real gross domestic product (GDP) growth moderated in the first quarter and that labor market conditions improved further. Consumer price inflation was restrained significantly by declines in energy prices and continued to run below the FOMC’s longer-run objective of 2 percent. Market-based measures of inflation compensation were still low, while survey measures of longer‑run inflation expectations remained stable.

Also — Industrial production decreased a little… Real personal consumption expenditures (PCE) appeared to decelerate somewhat going into the first quarter after rising markedly in the fourth quarter… The pace of activity in the housing sector remained slow… Real private expenditures for business equipment and intellectual property products appeared to be expanding in the first quarter at about the same modest pace as in the previous quarter… Federal spending data for January and February pointed toward a further decline in real federal government purchases in the first quarter. 

When economic conditions warrant the commencement of policy firming, the Federal Reserve intends to:

• Continue to target a range for the federal funds rate that is 25 basis points wide.
• Set the IOER rate equal to the top of the target range for the federal funds rate and set the offering rate associated with an ON RRP facility equal to the bottom of the target range for the federal funds rate.
• Allow aggregate capacity of the ON RRP facility to be temporarily elevated to support policy implementation; adjust the IOER rate and the parameters of the ON RRP facility, and use other tools such as term operations, as necessary for appropriate monetary control, based on policymakers’ assessments of the efficacy and costs of their tools. The Committee expects that it will be appropriate to reduce the capacity of the facility fairly soon after it commences policy firming

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