FXStreet (Delhi) – Darren Gibbs, Chief Economist at Deutsche Bank, suggests that the FOMC minutes point to a clear expectation that policy tightening will begin next month – and recall that this expectation was held even before the release of the strong October employment report. Key Quotes “The key passage was the following: “Some participants thought that the conditions for beginning the policy normalization process had already been met. Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting.” The minutes go on to confirm that given that expectation, the statement accompanying the October FOMC decision “was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook and that incoming data support the expectation that labor market conditions will continue to improve and that inflation will return to the Committee's 2 percent objective over the medium term.” We note that only “a couple” of members expressed concern that the statement could be misinterpreted as signaling too strongly the expectation of a rate hike at the December meeting.” “Reflecting on these minutes our US economics team are now expecting a December lift-off (they had earlier moved their call out to March 2016 having previously long expected a hike in 2015).” “In terms of the trajectory and cumulative amount of tightening between now and the end of next year, our team continues to see two more rate hikes in the first half of 2016. They then expect the Fed to remain on hold in the second half of 2016 to ascertain the effects of the cumulative 75bp tightening on the economy and the financial markets. They note that, as always, financial conditions will play an important role in shaping Fed policy actions, so these projections are fluid in some sense.” For more information, read our latest forex news.