Barclays' Michael Gapen said July FOMC......>

US VIEW: Barclays' Michael Gapen said July FOMC minutes were "largely in line

with our expectation. We looked for the discussion to be heavily focused on

inflation, with some increased concern about whether it would return to the

Fed's 2% target over time, while also signaling that an announcement on balance

sheet policy is imminent. Our views on these fronts were met."

- He said that "the surprise, in our view, was the degree to which participants

were willing to entertain how member forecasts of inflation are formed and

whether the existing framework remains valid. We do not believe the Fed reached

the conclusion that its inflation framework was invalidated by the recent

softness in inflation, but the fact that the discussion occurred raises the risk

of a shift in the reaction function away from a focus on resource utilization

and the Phillips curve to a framework where inflation inertia plays a greater

role. This would likely imply fewer rate increases over the forecast horizon,

given the weakness in incoming inflation data since earlier this year."