FED: July Minutes Suggest Rising Concern Over Falling Behind Cut Curve

As expected, the July FOMC minutes (link) signalled that participants were eyeing a cut in September, with "several" seeing it as "plausible" to cut already in July. There weren't many clues in the minutes on future monetary policy beyond that, with no mention for example of a potential >25bp cut.

• In keeping with the change of focus in the statement toward employment risks, though, the July Minutes suggest that cautionary voices on cuts were outnumbered by those who highlighted risks of cutting too little, too late. (Note in Fedspeak, "Many" is typically interpreted to be more participants than "some" which is more than "several").
• The minutes note "a majority of participants remarked that the risks to the employment goal had increased, and many participants noted that the risks to the inflation goal had decreased",
• On risks of falling behind the curve: "Some participants noted the risk that a further gradual easing in labor market conditions could transition to a more serious deterioration. Many participants noted that reducing policy restraint too late or too little could risk unduly weakening economic activity or employment. A couple participants highlighted in particular the costs and challenges of addressing such a weakening once it is fully under way."
• On the more cautionary side, and keeping in mind there may be some overlap with the previous group here, "several participants remarked that reducing policy restraint too soon or too much could risk a resurgence in aggregate demand and a reversal of the progress on inflation."