The Most Controversial Line From Today's Fed Minutes

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As we noted earlier, the most interest paragraph in today’s FOMC minutes concerned the fact that rates actually increased post-QE, and within that paragraph there was one sentence that definitely stood out.This one:

A number of participants indicated that, because the backup in rates appeared to importantly reflect changes in investors’ expectations about the size of Federal Reserve asset purchases, the backup was consistent with purchases helping to keep longer-term yields lower than would otherwise be the case.

It got a lot of guffawing, and it sounds like doublespeak, but just because it sounds ridiculous, and just because it’s coming from the Fed, doesn’t mean it actually is ridiculous.

Remember, you have various governors discussing the rise in rates. And it’s absolutely true — we heard it on CNBC several times — that very early in the QE program there was discussion that it might not go all the way to $600 billion, and that chatter did coincide with higher rates and a higher dollar.

So yeah, weird sound. It also makes perfect sense.

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