Perhaps the most significant feature of the minutes was the debate about QE's costs and risks. This had been suggested by public comments from Fed officials before meeting.
-Zach Pandl, senior interest rates strategist, Columbia Management
The release of the minutes of the January Federal Open Market Committee (FOMC) of the Federal Reserve (Fed) caused a tremor in the bedrock of investor euphoria last week. The minutes confirmed that the cost/benefit analysis of quantitative easing (QE) is at center of policy debate right now. However, the minutes did not provide a definitive signal that the program may be cut short.
In particular, it is not clear where Chairman Bernanke and Vice Chair Yellen stand. I believe the level of debate slightly raises the odds that QE will end this year. The Fed staff revised up their economic forecast. Fed officials’ own views also look to have brightened slightly. They referred to an economy
on a "moderate growth path" with reduction in downside risks. Better business conditions were noted across the Fed regions, but they also noted downside risks due to the sequester and the impact of the tax hike on consumers. There was also some debate about potential economic growth in the U.S. having fallen. This is a topic of significant debate within Columbia Management and is at the heart of our market valuation analysis.