Here’s Why the Fed Meeting Doesn’t Matter to Investors

by Jeff Reeves | October 28, 2014 8:13 am

The U.S. Federal Reserve will hold its Federal Open Market Committee meeting today and Wednesday. And while the FOMC headlines and Tweets about the Fed meeting minutes will be all over, the bottom line is that most investors don’t need to worry about the details from this nonevent.

Fed minutes from previous meetings, coupled with the September press conference[1] held by chairwoman Janet Yellen, leave little doubt as to what’s going on right now at the central bank.

And considering that the Fed minutes from this upcoming meeting will be cloaked in the typical “Fedspeak” ambiguity that Wall Street has come to expect, it could be a big waste of time to spend your week fretting over what the central bank will (or won’t) say.

Fed Minutes Preview

Here’s the most likely scenario for the minutes from this latest Fed meeting:

• QE Ends: The FOMC will announce the end of QE3 in October. The Federal Reserve has been stepping down its bond-buying efforts regularly, and has long predicted that October will be the finish line for the stimulus program. The planned end of QE has been well-telegraphed, and the Fed is right on schedule.
• Fed minutes will reveal little new: With the end of QE but no clear intention to raise rates yet, a “stay the course” tone is sure to pervade the recap from this latest Fed meeting. So reiterating past guidance and not making new waves should be expected … and anything else you read into the news is going to take a big leap of faith, and be based on little concrete detail.
• Fed meeting statement will be shorter. It’s a function of crisis-era policymaking that the Fed has had to be more open and communicative. But as Bill McBride points out[2] on Calculated Risk, the September statement[3] from the Federal Reserve clocked out at 895 words … but 10 years ago, the Fed meeting minutes totaled less than 300 words. Without any new policy efforts and the well-publicized end of QE expected, we should see a reversion to simpler and shorter messaging.

There is no press conference to allow for questions, and no real changes in the works. That means the rest is all reading between the lines — a fun pastime for Fed junkies, but not an activity that has practical value for the typical investor.

I expect the Fed meeting notes to point to improved labor conditions, but continued room for improvement regarding unused capacity among the workforce. I also expect the same lack of concern about inflation, though perhaps it might be colored with fears of deflation after consumer prices actually fell 0.2% in August and squeaked up a mere 0.1% in September, according to the most recent BLS data[4].

But beyond that, expect the Federal Reserve to forecast “considerable time” between now and any rate hike.

There. Now you have everything you need to know, so you can ignore the Fed minutes when they are released.

Jeff Reeves[5] is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks[6]. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com[7] or follow him on Twitter via @JeffReevesIP[8]. 

Source URL: https://investorplace.com/2014/10/fed-meeting-minutes-fomc/

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