Research Team at Deutsche Bank, suggests that the FOMC minutes pointed towards one of the Fed still being in a wait and see mode, keeping options open but with clear uncertainty around the outlook. Key Quotes “A lot of the focus was on the factors driving the turmoil in markets in January with the text showing that ‘while acknowledging the possible adverse effects of the tightening of financial conditions that had occurred, most policymakers thought that the extent to which tighter conditions would persist and what that might imply for the outlook were unclear, and therefore judged that it was premature to alter appreciably their assessment of the medium-term outlook’. That being said, there was however the mention that ‘uncertainty had increased’ and so ‘many saw that these developments as increasing the downside risks to the outlook’. It was also highlighted that ‘a number of participants indicated that, in light of recent developments, they viewed the outlook for inflation as somewhat more uncertain or saw the risks as being to the downside’. Unsurprisingly China was also highlighted as a concern amongst policymakers as well as the broader effects of a greater than expected slowdown in other emerging markets. A telling stat was that the word ‘uncertainty’ or ‘uncertain’ was mentioned 14 times compared to seven times in the December minutes. Meanwhile, Boston Fed President Rosengren provided his updated view yesterday. His comments echoed a lot of what was said in the minutes, saying specifically that ‘recent global events may make it less likely that the 2% inflation target will be achieved as quickly as had been projected in forecasts’. As a result, Rosengren said that ‘if inflation is slower to return to target, monetary policy normalization should be unhurried’. St Louis Fed President Bullard followed this up with comments late last night saying that ‘I regard it as unwise to continue a normalization strategy in an environment of declining market-based inflation expectations’. All said and done the combination of yesterday’s minutes and the economic data did see the probability of a Fed rate hike by the end of this year nudge up to 41% from 34% on Tuesday. 10y Treasury yields closed up just shy of 5bps at 1.820% although were lower post the minutes.” For more information, read our latest forex news.