There are a few points I wanted to elaborate on from the March FOMC minutes.  It relates to the discussion of future meetings.  The minutes stated “several” participants thought that a hike in April would “signal a sense of urgency they did not think was appropriate.”  Typically, the discussion is on just the current meeting, so it’s interesting that a future meeting was discussed.

* We have two strong diametrically opposed groups. A “couple” of people wanted a HIKE.  At the same time, “several” people wanted to skip the March meeting AND the April meeting (skip TWO meetings).  The latter smells of forward guidance.  That’s a wide range of views!

* Since Yellen said at the press conference that April was “live,” it’s possible she was not in the group of “several” participants (Brainard & company). It’s also possible she was speaking broadly, and her comment had nothing to do with which “group” she was in.  I lean slightly towards the former.

* It seems to me that the Fed could need a two-meeting hiking path[1] (as I have speculated in the past) for three reasons:

(1) You may need time for some of the stronger doves to come in-line.  Yellen is a consensus builder.  Normally, I would say you could ignore the uber-doves if they were a bunch of Bank Presidents (see Kocherlakota in past years).  But Brainard is a Governor, and I suspect Dudley could be in the uber-dove group (and possibly Tarullo).  If the uber-doves need some time to back off of skipping a second meeting (as they would have at the March meeting), it’s possible a reasonable compromise would be to insert “balanced” back into the statement as a stepping stone, and then hike at the subsequent meeting.

(2) The markets are unprepared.  I strongly believe the Fed is not going to want to rattle the markets – especially not after the violent reaction to the Dec meeting.  Giving some sort of warning (like putting back in the balance of risks on growth) could be a useful stabilizing tool to mitigate some of the damage.

(3) There really is no rush to hike.  See 0.1% GDP.

The impact of a “two meeting hike” is that if “balanced” is not put back in at this NEXT meeting in 2.5 weeks, then the June hike is more doubtful.  I suppose June already is doubtful with only 3.5bps priced into that meeting.  The thing is, after we just saw Q1 GDP drop 200bps in less than 4 weeks, can they really say the risks to growth are balanced at the April meeting?  This seems unlikely.

[1] Step 1: put back the balanced assessment of risks (at one meeting).  Step 2: hike (at next meeting).  Of course if the data comes in super-strong, they can do both in one meeting, but c’mon – we are coming off a 0.1% GDP.