What to watch

Fed minutes may give clues to next moves

Federal Reserve Chair Janet Yellen told Congress last week that a March interest rate hike is on the table. Minutes of the Fed’s early February meeting could give a better read of the odds it will happen.

Although Yellen didn’t tip her hand in testimony before the Senate banking committee, she did say that “every meeting is live,” including the Fed’s next gathering March 14-15.

Investors remain complacent, with fed fund futures giving just 17% odds of a rate increase in March and 47% in June. But some positive economic data last week increased the chances of Fed action, economists say, including strong pickups in inflation and retail sales.

The Fed raised its benchmark short-term rate in December for the first time in a year. Fed officials have indicated they expect three quarter-point rate increases this year. Minutes of the Jan. 31-Feb. 1 meeting, out Wednesday, could signal if the first of those moves is imminent

Many economists also expect the minutes to reveal debate among Fed policymakers about when to start shrinking the Fed’s bloated balance sheet. During and after the financial crisis, the Fed bought more than $3 trillion in Treasury bonds and mortgagebacked securities to push down long-term rates. Now that the economy is healthy enough to begin raising short-term rates, some Fed policymakers believe the next step is to shrink the Fed’s holdings. Yellen last week gave no hint that’s coming soon.