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What a difference can a few days make! When on February 2 it was announced that wages in the U.S. rose by 2.9 percent (and that, after a revision, wages in December rose a bit more than previously estimated), stock market prices began to swing violently. Stock market indexes lost hundreds of points per minute and long-term interest rates rose to heights last seen in 2014. At times, investors even began to believe that the official rate in the US will be raised four times and not three times, as the central bank had more or less promised.

All these things played out days after a meeting of the Fed’s interest-rate-setting committee (FOMC) at the end of January. This week, the minutes of this meeting were released to the public. How did Fed members expect the US economy to develop in 2018 and how can we view their concerns in the light of the recent volatility on markets and the recent economic developments?

The decision makers of the Federal Reserve are unshakably optimistic about the prospects of economic growth. Trump’s tax cuts, the high and steady growth of the global economy and the positive sentiment on financial markets (read: low interest rates, increasingly high stock market prices), were mentioned as important reasons. Some FOMC members even adjusted their own economic growth expectations upward for the current year. One of the FOMC’s members recently said in an interview that the “U.S. economy appears healthy and to be in its best shape since the crisis.” According to him, the economy is by some measures performing even better than the period before the last crisis.

Further Hikes Yet Not Precisely “More” Hikes

Fragile

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