July 26, 2024 19:36 GMT
MNI Fed Preview - July 2024: September Signals In Spotlight
The Fed will hold rates for an 8th consecutive meeting at its July meeting, putting immediate attention on any signals about rate cuts beginning in September.
Central Bank PreviewAnalysisAnalysisHomepageCreditCommoditiesFX PiFed - PreviewCentral Bank ReportsMarkets
EXECUTIVE SUMMARY:
- The Fed will hold rates for an 8th consecutive meeting at its July meeting, putting immediate attention on any signals about rate cuts beginning in September.
- While inflation and the labor market cooled in the second quarter, providing a clear path to rate cuts by year-end, underlying demand has remained resilient in defiance of what FOMC officials see as “sufficiently restrictive” policy.
- With the lingering memory of various data "head fakes" in mind on both the upside and downside of the inflation and rate cycles, yet a “soft landing” still seen in reach, the FOMC is likely to express only cautious optimism.
- The policy statement is due for key adjustments to the characterization of recent inflation and employment, and perhaps to the shifting balance of risks – but it’s not clear the Committee will adjust the forward rate guidance, in contrast to previous cycles where it explicitly signaled that it could move rates at an upcoming meeting.
- That would put the focus on Chair Powell to deliver the message at the press conference that the FOMC is cautiously open to cuts at upcoming meetings.
- The absence of a clear signal about an upcoming rate cut would disappoint current market pricing for 2 to 3 rate cuts by year-end, which is more aggressive than the 1 to 2 cuts the FOMC eyed just 6 weeks ago.
Note to readers: MNI’s separate preview of sell-side analyst summaries to follow on Monday Jul 29
FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK:
272 words