FOMC participants continued to focus on the case for a rate hike in December. The policymakers who spoke appeared to share the view that a rate hike in December would be appropriate. Treasury yields responded strongly to Dudley’s comment that “we should be increasingly optimistic that we will reach our inflation objectives over the next few years.” Today, Fischer argued that “the economy has moved back to the vicinity of the Committee’s employment and inflation targets—suggesting that the cyclical drag on the economy has been greatly reduced, if not largely eliminated.”
The market remained interested in how FOMC participants are incorporating possible fiscal policy changes into their outlooks. Harker noted that the broad contours of the outlook haven’t changed since the election, while Mester warned against the Fed overreacting to market volatility, since changes in policy are still uncertain. Yellen’s testimony (link) indicated that uncertainty about prospective future policy alone would not merit holding off a December hike.