MNI Fed Preview - July 2023: September Signals In Focus

We've just published our preview of the July 25-26 FOMC meeting (PDF here):

• The Fed will hike by 25 basis points and maintain its tightening bias at the July meeting.
• Chair Powell is likely to suggest that a follow-up hike is possible at the next meeting in September, but will emphasize that no decision has yet been made, and will depend on the substantial inflation and jobs data in the interim.
• That messaging would retain the optionality to hike at consecutive meetings if the next two inflation prints between now and then warrant a (likely final) hike. The market impact of this messaging is likely to be modestly hawkish.
• Two key, related debates will be in focus at this meeting and until the September meeting: how long are the lags between policy tightening and the impact on the economy, and to what degree banking sector stress will take the place of further hikes – if at all.