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July FOMC Minutes Preview - Deutsche, Morgan Stanley Eye Downshift Clues (3/3)

FED
  • Deutsche: "Among the dovish signals the market latched onto [from Powell's July press conference] were the indications that the Fed would downshift from 75bps "at some point" and that their reaction function for making those decisions would include a variety of factors including growth, the labor market, and proximity to neutral policy, even as inflation remains the primary driver of policy...Since that time, officials have pushed back on this dovish interpretation... Even so, comments since the meeting indicate that officials have begun to diverge on the precise path for policy ahead – including whether a 50bp or 75bp hike is appropriate next month. The minutes could well provide some clues about how officials are likely to determine whether a downshift is warranted."
  • Morgan Stanley: "We will focus on what data policymakers wanted to see in July and August that would warrant the FOMC to slow the paces of rate hikes. Fed Chair Powell tried to remain nimble in his comments and not provide much forward guidance for September. However, there was a clear focus on inflation and the importance of seeing a deceleration in inflation to slow the pace of hikes. We will look closely for any language around inflation easing and the importance for job growth slowing to warrant smaller rate hikes."
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  • Deutsche: "Among the dovish signals the market latched onto [from Powell's July press conference] were the indications that the Fed would downshift from 75bps "at some point" and that their reaction function for making those decisions would include a variety of factors including growth, the labor market, and proximity to neutral policy, even as inflation remains the primary driver of policy...Since that time, officials have pushed back on this dovish interpretation... Even so, comments since the meeting indicate that officials have begun to diverge on the precise path for policy ahead – including whether a 50bp or 75bp hike is appropriate next month. The minutes could well provide some clues about how officials are likely to determine whether a downshift is warranted."
  • Morgan Stanley: "We will focus on what data policymakers wanted to see in July and August that would warrant the FOMC to slow the paces of rate hikes. Fed Chair Powell tried to remain nimble in his comments and not provide much forward guidance for September. However, there was a clear focus on inflation and the importance of seeing a deceleration in inflation to slow the pace of hikes. We will look closely for any language around inflation easing and the importance for job growth slowing to warrant smaller rate hikes."