July 2023 FedSpeak: Broad Consensus On Hikes (1/2)

FOMC participants have sounded broadly unified on the need to tighten monetary policy further (as discussed in our FedSpeak update), in line with June’s dot plot which implied two further 25bp rate hikes implied by the end of 2023.

• The June FOMC Minutes noted disquiet about the decision to pause instead of continuing to hike, but also broad agreement for further tightening this year - "some" officials wanted to hike by 25bp in June, or "could have supported such a proposal", but in the end "almost all participants judged it appropriate or acceptable" to hold fire for now.
• The broad spectrum of those envisaging 50bp of further hikes includes the dovish (Daly) and the hawkish (Waller), though most have espoused optionality on the timing of those hikes.
• The only participant who has been vocal in not seeing more hikes is Bostic, telling MNI he pencilled in rates on hold through 2024. (The identity of the other participant who didn’t pencil in further hikes in the June SEP remains unknown, though doves Collins / Harker haven’t been heard from since that meeting.)
• Since the June meeting, Chair Powell has reiterated (and in some cases augmented) his message from the June FOMC. Powell has reiterated that not only did a “strong majority” of participants see two further hikes this year in the baseline scenario, with July being re-emphasized as “live”, Powell has said that June’s decision was not a “pause” and raises at consecutive meetings are “on the table”.
• Re back-to-back hikes, Waller has been clearest in seeing “no reason” why the FOMC shouldn’t hike in July, and stressed that September was a “live meeting”.
• There was little evidence from participants’ post-data rhetoric that softer-than-expected June job gains and inflation changed their views on the required amount of further tightening.