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What experts look for in Federal Reserve meeting minutes

Do you remember the first week of this month? May 3 and 4, to be exact? These are the dates the Federal Open Market Committee met to discuss what to do about this whole inflation thing.

Even if you don’t remember the meeting, if you listen to this show, you probably remember what they voted for: a half percentage point hike in interest rates aimed at cooling the economy and, with it, rising prices.

Why bring up such old news? Well, Wednesday at 2:00 p.m. EST we get the minutes of that meeting. Filled with economic jargon, Fed minutes may not be good fodder for book clubs, but they are worth paying attention to.

Three weeks after the meeting of the open market committee, the Fed publishes the minutes. Since these minutes come out in the afternoon EST, LPL Financial’s Quincy Krosby sometimes has to have an awkward conversation with Dunkin’s employees.

“You have to explain to them that fresh coffee is better than coffee that’s been sitting there for an hour,” Krosby said.

Because she said the Fed minutes — a summary of the conversation, not the actual dialogue — are best paired with stimulus.

Here is one reading: “”In their assessment of the monetary policy stance necessary to achieve the Committee’s maximum employment and price stability objectives, the members agree that with an appropriate firming of the policy stance monetary…” Krosby said.

A summer beach reads that’s not the case, but Fed minutes are deliberately written that way, according to Peter Conti-Brown of the Wharton School at the University of Pennsylvania. It’s a kind of code book.

“If you know the code, it will give you information, and if you don’t, it’s like you’re watching a James Bond movie and the spies are talking to each other in a language they don’t intend you to understand” , he said.

Fed watchers often look for clues that the committee’s consensus is more fragile than Chairman Jay Powell suggests. Perhaps some members want to raise rates faster or slower or see inflation more as a supply chain issue than excess demand.

“Are we getting some sort of clue about big cracks and big fractures in the consensus that will tell us in future meetings that we’re going to see zigs and zags?” said Conti-Brown.

The minutes do not indicate who said what, which may seem antiquated in the age of live tweets and live streaming. But there’s a reason the Fed isn’t immediately releasing the actual transcript, said Bill English of the Yale School of Management.

“Then the meeting would become less of a serious meeting where people learn from each other and potentially change their minds,” he said.

The full transcripts eventually come out – five years after the meeting.

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