USD: What To Look For At This Week's FOMC Minutes – SEB

The focus of USD investors will be on this week’s FOMC minutes from the May meeting (Wed). 

SEB Research interpreted the May FOMC statement as being slightly hawkish and expects the Fed to hike in June and will look in the minutes for indications about how certain Fed was that the Q1 weakness was temporary and any discussions of fiscal policy.

Arguably, the most interesting aspect of the May minutes would be details about balance sheet normalization. We will be looking for indications of expected start time, the appropriate future size if the balance sheet, and the pace of reduction.

Another interesting issue is the possibility of outright sales of mortgage backed securities (MBS). At this point, we expect that reduction in the balance sheet will begin in December 2017. Some rough estimate suggest that the rate of reduction could be around 20bn per month, corresponding to any policy rate hike per year. However, any details in the minutes could result in a revision of our estimates,” SEB adds. 

Source: SEB Research

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