The July Statement’s rate hike guidance will be closely watched for any alterations. We doubt there will be many major changes - certainly no signal the FOMC sees the end of the hiking cycle in sight, and probably not whether it intends to downshift from the 75bp hike pace at the next meeting, but there are several areas of interest. Our mock-up of general expectations for the statement appears below.
- Characterization of growth: The description of “overall economic activity appears to have picked up after edging down in the first quarter” is due a downgrade given recent readings. But job growth will likely be described as remaining strong/robust.
- Eyeing weaker headline price pressures: Our Instant Answers ask whether the FOMC alters the use of “higher energy prices” in its list of factors underpinning elevated inflation. An acknowledgement of the fall in energy prices from the recent peak would be a potentially dovish development if it suggests the Fed is becoming less concerned about headline price pressures. However, they’d probably also caveat this by observing that overall price pressures remain elevated, which could mute the potential impact.
Source: MNI, Federal Reserve