Federal Reserve Minutes Preview: Will the Fed hint for a more aggressive stance

During the May Meeting the Federal Reserve decided to keep rates unchanged at the 1.5%-1.75% range expecting also an additional rate increase during H2  2018. As of today, the implied probability of one more hike for this year is hovering around 90% while the probability of 2 more hikes is at 50%. It will be very interesting today to understand if the Central Bank will hint more strongly at 2 more rate hikes.

Here below the latest Dot Plot showing high uncertainties about the interest rate at the end of this year

Yield Curve:

During the last days some voters and non-voters members of the FOMC issue some conflicting comments.  Mr Bostic and Mr Bullard expressed their concerns on a potential inversión of the yield curve stating that the Fed has to prevent this to happen.  Mr Williams on the other hand seems to be less concerned about a potential inversión of the curve.

The Chart below shows the 2Y-10Y Spread as of yesterday. The spread is getting closer and closer to Zero. This may represent a concern

Natura Rate of Interest:

 As of today the Neutral Rate of Interest is expected to be 2.5%, which is the rate where the market expect the Fed to stop hiking interest rates. It will be interesting to understand if the Fed will hint for a Fed Fund trajectory that will end above 2.5%.

Summary: These minutes may have a notable impact on the Markets.