Today's FOMC Minutes and Yesterday's US Economic Data

It is unlikely that today's FOMC Minutes will contain anything new with regard to the chances of a Fed rate hike in June.  The April Statement had acknowledged that economic growth appeared to be slowing.   So, while there both hawkish and dovish views within the FOMC, the bottom line should not be a lifting of the odds of a near-term hike if slower growth is being emphasized.

But, even if the Fed does not hike in June, it could try to raise the odds of a near-term hike in that meeting's Statement.  Or, Yellen could use the "Humphrey-Hawkins" Testimony in July to put markets on alert.  With a Congressional audit of the Fed -- including how monetary policy is conducted -- under discussion, Yellen may not want to do anything that the markets signal is bad policy.

Yesterday's US economic data -- April Housing Starts/Permits, Industrial Production and CPI -- are not as strong as the markets appeared to think:

1.  Starts looked to be an overshoot related to a post-winter snapback.  They should fall back a bit in May, based on their relationship with Permits.

2.  1-Family Permits remained in their 6-month old flattish trend, albeit near the high end of that range.

3.   IP was just a rebound from March, with the 2-month average for manufacturing output flat.

4.  Total CPI was boosted by the jump in oil prices -- a relative price change rather than a sign of inflation.   Core CPI was contained at 0.2% m/m, with the y/y falling to 2.1% from 2.2%.

Indeed, the Atlanta Fed's GDP Model lowered its Q216 Real GDP projection to 2.5% (q/q, saar) from 2.8% after these data.

Note, as well, that last Friday's strong April Retail Sales report also likely reflected a post-winter bounce.  I'm hearing from retailers that May's cold weather has hurt sales this month, and I would not be surprised to see a soft May Retail Sales report.