**MNI POLICY: FOMC Mins: Many See Another Rate Hike Soon>

--5 Things We Learned From The Minutes Of the July 31-Aug 1 FOMC Meeting

By Kevin Kastner, Sara Haire, Shikha Dave, and Harrison Clarke

     WASHINGTON (MNI) - The following are the key points from the 

minutes of the July 31-August 1 FOMC meeting released Wednesday:

     - Strong indications of a September rate hike. The minutes showed 

that many participants agreed that if economic conditions progressed as 

expect, it would "likely soon be appropriate to take another step in 

removing policy accommodation." 

     - Participants said that labor market conditions had strengthened, 

and that wage increases will occur "before long." A few suggested that 

there could still be labor market slack. They expect the tariffs to have 

an impact on short-term inflation, but many expect inflation to remain 

near 2%. However, some raised concerns that if the economy operated 

beyond potential for prolonged period, it could lead to inflation 

pressures or financial imbalances. 

     - Looking ahead, many participants also noted it may be appropriate 

"in the not too distant future" to modify the language that policy 

"remains accommodative," as that language would not be appropriate "at 

some point fairly soon." A number of participants noted uncertainty in 

estimating the neutral, but participants noted the FFR was moving closer 

to the range of estimates for neutral. 

     - All participants said that the trade disagreements and proposed 

measures were "an important source of uncertainty and risk." The 

noted that a prolonged dispute could have adverse impacts, but no one 

said specifically what impact it would have on the near-term progression 

of monetary policy. They noted that tariffs had put upward pressure on 

input prices, but said that most businesses had not cut back on capex or 

hiring yet. 

     - On the yield curve, several pointed to evidence that a flatter 

curve precedes recessions and that policy-makers should watch it 

closely. Others, however, suggested that "inferring economic causality 

from statistical correlations was not appropriate," that the flattening 

could be caused by outside factors, and thus should only be considered 

along with other economic indicators.

     - There was some discussion of the operating framework and the 

balance sheet, and the Chairman suggested the Committee pick up the 

discussion of these matters in the fall.

     - The discussion on IOER was related only to the previous move and 

how it was effective.

     ** MNI Washington Bureau: 202-371-2121 ** 

[TOPICS: MMUFE$,M$U$$$,MAUDR$]