FOMC Minutes Preview: Clues For A July Hike (2/2)

The main question for the June minutes is the degree to which the FOMC was divided over the decision to deliver a “hawkish pause/skip”, and to what degree the communications were crafted in a hawkish direction to appease those who would have preferred to hike at that meeting.

• Communications have been largely unified since the June meeting on the need for further tightening, with Chair Powell leading the way (even though we haven't heard from several FOMC participants yet).
• But nobody has yet expressed definite preference for a July hike. And as our Policy Team pointed out prior to the June meeting (see "Fed Most Divided Since Start of Hikes, More Loom"), the Fed is at its most divided since the start of the hiking cycle.
• We could see that dynamic begin to be reflected in the minutes going forward.

Sell-side analysts are eyeing several aspects in today's minutes, including:

• discussions around data thresholds for hiking in July and whether the staff continues to have a baseline for recession later this year (Deutsche)
  
• the possibility that a July hike could be signalled using some variant of "soon" language that has been employed in the past, and/or appetite for back-to-back hikes (Scotia)
  
• a Committee split between hiking further and pausing (Citi), with a desire to maintain maximum optionality around the future path of policy (BofA)