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 (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.
 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.