The minutes of the Fed's January meeting today are likely to shed some insight on just what the heck FOMC members were thinking when the central bank pledged to keep rates at zero through 2014, at least.
At the same time the Fed pledged to keep rates low through 2014, the majority of its members -- 11 out of 17 -- predicted the Fed will have hiked before the end of 2014. That's according to the new information on the thinking of the FOMC members, released as part of Ben Bernanke's "transparency" push at the same January meeting.
Why the Fed chose to make a pledge that contradicts the expectations of its members is "a head-scratcher that hasn't been adequately answered," says Jim Bianco, president of Bianco Research, who further notes the majority of economists expect the Fed to hike before the end of 2014.
"I'm hoping the minutes will explain or square that circle how everyone think the funds rate will be hiked before then but they can make that promise to keep rates low until the end of 2014," he says.
In addition to potentially shedding light on that conundrum, the big issue for the market is whether the minutes will reveal any plans for another round of quantitative easing.
"The market cares about one thing: Whether the Fed is going to do QE3," Bianco says. "The Fed's promise to keep rates low for an extra year makes market believe it's more likely. If we get anything that throws cold water on the idea QE3 is coming, the market would react negatively."
Conversely, "stock and risk markets will respond positively" to any further indication on the timing or likelihood of more Fed asset purchases, he notes.
Judging by the action in recent weeks, the market doesn't need any more "help." But that might not stop Bernanke from pouring more gasoline on the fire, judging by the Fed's recent actions.