NEW YORK, April 9 The release of the Federal Reserve's policy meeting minutes, usually a fairly staid affair, was anything but in January and February, thanks to spirited debate about when and how to end the central bank's stimulus program.
That debate undoubtedly continued at the central bank's March 19-20 meeting, but minutes due on Wednesday may not provoke the kind of market fireworks they did at the start of 2013, when long-dated Treasury yields soared to nine-month highs.
Since voting 11-1 last month to keep buying $45 billion in Treasuries and $40 billion in mortgage bonds per month, data has shown the economy added just 88,000 jobs in March, the slowest pace of hiring in nine months. That should weaken the argument of those officials who think the economy is growing swiftly enough to justify winding down the Fed's asset purchase program.
"I think the Fed minutes will read as stale because we have had some weaker economic numbers since they last met," said Eric Lascelles, chief economist at RBC Global Asset Management in Toronto. He said the Fed's core policymakers, led by Chairman Ben Bernanke "have long been saying they are not convinced that hiring is strong enough to warrant an end to stimulus."
Some economists say the market overreacted in January when signs of stronger growth and the Fed's debate over stimulus implied an imminent change in policy.
"I think the market had a better job market perspective than the Fed officials did," said Michael Hanson, senior U.S. economist at Bank of America Merrill Lynch. "A couple of good months wasn't going to move the Fed."
In late March, Chicago Fed President Charles Evans, a voting member on the Fed's policy-setting committee this year, said paring asset purchases probably would not happen before year end, adding that he wants to see the U.S. economy add more than 200,000 jobs every month for at least six months.
"That hasn't happened at any time in the 2000s," Hanson said. "It's a tough standard. Clearly Fed officials, the core voters, are in it for a while longer. I think with the December and January minutes, people really jumped the gun."
In early January, bond yields shot higher, stocks drifted lower and the dollar rose after minutes showed some officials wanted to start scaling back purchases sooner rather than later.
Dallas Fed President Richard Fisher, one of the most outspoken among the minority of so-called hawks at the Fed, has called for acting before the year is out, citing improvement in the housing market, which the stimulus was partly designed to support by lowering long-term interest rates.
But only one current voting member on the Fed's policy-setting committee, Kansas City Fed President Esther George, has voted against extending bond purchases.
Steve Van Order, a fixed income strategist at Calvert Investments, which oversees $12.5 billion, said markets reacted earlier this year because they were surprised that several officials were raising concerns behind closed doors.
But now that the surprise has worn off, "you have to filter these minutes through the data we've seen recently," he said. "We know there's a big policy debate going on, but I think market reaction this time will be pretty tame."
To be fair, one lackluster month of job growth likely won't convince the hawks to learn to love the Fed's stimulus spending, while even Bernanke has signaled a willingness to begin scaling down the bond-buying program if the economy improves steadily.
Another noted dove, San Francisco Fed President John Williams, said last week the central bank could start cutting back as soon as this summer if the economy picks up steam.
And on Monday, Cleveland Fed President Sandra Pianalto, known for her centrist views, said the central bank could curb the potential risks of its easing program by simply slowing the pace of asset purchases.
All of this makes handicapping the market's reaction to the minutes "tricky," said Thomas Graff, a portfolio manager at Brown Advisors in Baltimore, which oversees $30 billion.
"I strongly suspect the minutes will reflect a growing consensus that maybe QE doesn't need to be quite as large as it is if things conintue to improve," he said, adding that could put some pressure on bonds and possibly stocks.
But Graff is quick to note that investors should not expect too much too soon. A slow tapering of purchases, or an approach such as the one Bernanke suggested this year in which the Fed, rather than selling bonds, simply lets trillions of dollars in securities mature, would not spark sharply higher rates.
"I think there are a lot of itchy trigger fingers out there with the idea that interest rats will soon spike," he said. "I think people are not respecting the Fed's ability and will to keep interest rates low for a quite a while yet."