Minutes of the January 29/30 FOMC meeting were all in all in-line with the messages delivered by the statement and Chair Jerome Powell’s press conference. FOMC members supported the change in forward guidance. That is, Fed would now “be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.”

Nevertheless, the minutes also noted that “some participants believed “if the economy evolved as they expected, they would view it as appropriate to raise the target range for the federal funds rate later this year.” This view keeps the case for another hike in 2019 alive.

Regarding the balance sheet rolloff plan, “almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year.” And, options on “substantially slowing” the runoff were presented during the meeting.

Full FOME Jan minutes here.

New York Fed President John Williams said in a Reuters interview that he’s comfortable with the current interest rate level. He described the current federal funds rate, at 2.25-2.50%, as being “around my view of what neutral interest rates are”. And “monetary policy is where it should be”.

He noted that a shift in economic outlook is needed for Fed to resume the rate hike cycle. Nevertheless, he added “I don’t think that it would take a big change, but it would be a different outlook either for growth or inflation”.

Regarding balance sheet reduction, Williams noted it could end when bank reserves hit “maybe $1 trillion of reserves or somewhat more than that”. That’s only around USD 600B below current levels. He added, the figure is “a guess today of the amount of reserves that will be held in the system in the future – but again we are learning and will get a finer touch on that.”

Cleveland Fed President Loretta Mester said in a speech that the most likely case this year is that “the economy will transition toward a more sustainable pace of growth, with continued strength in labor markets and inflation near 2 percent.” And if this case realizes, ” fed funds rate may need to move a bit higher than current levels.

Though, she also emphasized that Fed must “remain attentive to several risks to the outlook, including the slowdown in global growth, uncertainty over trade policy, tighter financial conditions, and the changes in business and consumer sentiment”. If some of the risks manifest themselves, and, economy turns out to be weaker than expected, she will need to adjust her outlook and policy views.

For now, federal funds rate are now at the lower end of the longer-run neutral level. Monetary policy is “neither ahead of nor behind the curve”. She said “we can take the time to make that assessment. ”

Full speech here.