Some Big Monetary Policy News Coming Out Next Week...

From Deutsche Bank:

The other main event on this week’s economic docket is the release of the minutes from the September FOMC meeting on Wednesday afternoon. In particular, we will be scouring the minutes to get a better sense of the degree of urgency policymakers felt as they implemented “active twist” at the meeting. The fact that the labour market did not shift into reverse gives us significantly greater confidence that not only will recession be averted, but also that QE3 will not be implemented—at least in the near term. The minutes could also put to rest the issue of whether or not the Fed is considering a reduction in interest on reserves as a viable policy tool in the current environment. We do not believe that there is broad support for this. The most likely action in the near term would be a different version of “extended guidance” on Fed policy, regarding both the funds rate and the size of the Fed balance sheet. Policymakers want to tie the Fed exit strategy to various thresholds for employment and inflation, rather than the current guidance which states that the fed funds rate is likely to remain at “exceptionally low levels […] at least through mid-2013.” It is possible that this modified guidance strategy could appear at either the November 2 or December 13 Fed meetings. If they move toward such a plan, it is plausible that some (or all) of the dissenting votes could disappear. –CR   

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