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Stock Market drops 108 points—because of Meeting Minutes?

“Dow drops 108 points” read a headline in the Wall Street Journal on Wednesday, 20 February 2013. Why such a drop? “Stocks slumped after the Federal Reserve showed rising unease about its efforts to support the economy, sending the Dow Jones Industrial Average to its second-biggest drop this year,” reported the Journal. How did the Federal Reserve show its rising “unease?” Why, the meeting minutes from its Federal Open Market Committee (FOMC) meeting, of course!

Meeting minutes of the Federal Reserve’s Open Market Committee have real impact on financial markets. That’s because in addition to recording what the FOMC did, the minutes also record summary discussions among committee members on the outlook of the economy and whether the FMOC should make any policy changes.

For a regular society, the meeting minutes may not affect the financial markets, or any markets for that matter, with the release of their meeting minutes, but they are important for establishing a record of actions taken. Most importantly, as Robert’s Rules, notes, “…the minutes should contain mainly a record of what was done at the meeting , not what was said by the members.” P. 468. That is, meeting minutes should only contain basic information such as the date, time, and type of meeting, of the society, whether the chairman and secretary were present. Beyond that they should only contain motions and how they were disposed of, summary of verbal reports, notices, and all points of order and appeals.

The meeting minutes of the FOMC follow this format fairly well up to a point. (See the meeting minutes here.) They had their annual elections and what seem to be regular motions to establish the conduct of FOMC operations for the upcoming year. Then the minutes begin to summarize at great length the ponderings of various members about the direction of the economy and whether changes ought to be made to current policy. This discussion is what the stock market responded to; it’s like reading tea leaves to predict how members of FOMC are going decide on key monetary policy issues.

For more on meeting minutes, see the article "Meeting Minutes should reflect all that was said, right?"

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