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Minutes Confirm High Bar For Another Rate Hold In July (2/4)


The June minutes suggest there is likely a high bar for the upcoming data (payrolls, CPI) to stop the FOMC from hiking in July, which of course is a "live" meeting as Powell has signalled. And "almost all" participants expect additional rate increases this year as noted in the economic projections (as noted by the 2-hike median in the dot plot).

  • Reading through the minutes actually sounds more like a series of reasons to raise rates further - not a justification to pause - with inflation more stubborn than expected and risks lying to the upside, and the banking sector and overall growth resilient.
  • While "some" on the FOMC saw risks of longer-term inflation expectations becoming unanchored, the main reason to hold off on a June hike that "several participants cited the possibility of delayed effects of tighter credit conditions potentially contributing to a slowdown in economic activity that reduces inflationary pressures", with participants wanting more time to assess.
  • But there was debate about this, as "participants noted that the full effects of monetary tightening had likely yet to be observed, though several highlighted the possibility that much of the effect of past monetary policy tightening may have already been realized."

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