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Why Does Anyone Care About Minutes Of Weeks-Old Fed Meetings?

There's been a bit of a brouhaha over the Federal Reserve's inadvertent early release Tuesday evening of minutes from its closed-door March 19-20 policy meeting.

As The Associated Press writes, "employees at JPMorgan Chase, Goldman Sachs Group, Wells Fargo and Citigroup were among those to receive [the] market-sensitive information."

The Fed says a staffer mistakenly sent the report to a group, also including some trade associations and lawmakers, that should have gotten the information right after it was made public — not before. The Fed's inspector general is going to investigate what happened.

There haven't been any reports to indicate that anyone who got the news a day early traded on the information (which was supposed to be released at 2 p.m. ET on Wednesday; after discovering the mistake, the Fed put it out to the rest of the world at 9 a.m. ET that morning).

But once the minutes were there for everyone to see, they did move financial markets. As The New York Times writes, stock markets rallied. Traders focused on signs that Fed policymakers are committed to battling "a weak economy and soft labor market," CNBC says.

All this fuss about minutes of a meeting held three weeks ago raises a question: Why do they matter so much to so many investors and financial institutions?

It's because "the markets are always looking for tiny morsels of information about what these guys are thinking," says Michael Englund, chief economist at Action Economics, a bond and currency consulting service that provides its clients with economic analysis.

The minutes offer a chance to see how Fed policymakers are "balancing their different views," Englund tells us. "And any subtle changes can change perceptions in the markets."

Other than occasional speeches given by Fed policymakers as well as Chairman Ben Bernanke's twice-annual testimony before Congress and his handful of news conferences each year, Fed watchers don't get much information about what the central bank's chiefs are thinking. So the meetings' minutes get parsed carefully. The policymakers gather eight times a year.

And, Englund says, "this was a bad one to leak because it did [end up] moving the market." Traders concluded, he says, that "perhaps there was more energy" expressed by Fed policymakers for gradually reducing the amount of stimulus they're giving the economy — meaning that those policymakers thought the economy is on the upswing.

Of course, with economics there's always an "on the other hand." In this case, since the Fed policymakers met in mid-March there's been disappointing news on job growth. That could mean the economy isn't doing as well as those Fed officials thought, which in turn could mean that they won't move to ease up on their stimulus efforts.

We won't know what Bernanke and his colleagues think, though, until the third week of May — when the Fed releases (presumably on time) the minutes of their April 30-May 1 policy meeting.

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