Updated at 4:20 PM EST
The Federal Reserve is likely to use incoming data, contrary to its preferred policy path, to determine the size of future rate hikes, minutes after the central bank’s July policy meeting signaled on Wednesday, although inflation President Jerome Powell and colleagues described it as “uncomfortably loud.”
The minutes indicated that the pace of interest rate hikes was likely to slow over the coming months, but agreed at the time that there was “little evidence” of a slowdown in inflation after two consecutive rate hikes of 75 basis points, most recently on July 27, which raised The standard fed funds rate is between 2.25% and 2.5%.
Since that decision, the title CPI It slowed significantly, to a pace of 8.5% in July, while retail sales improved as a result of lower gas prices and consumer confidence rising on the back of strong jobs. The Fed will see two releases of PCE price index data, its preferred inflation measure, the August jobs report, and another CPI reading before its next interest rate decision on September 21.
“Some participants noted that once the policy rate reaches a sufficiently restrictive level, it may be appropriate to maintain that level for some time to ensure inflation is steadily on the path back to 2%,” the minutes read. “Participants agreed that the Committee, by urgently raising the policy rate, was acting with determination to bring inflation down to 2% and anchor inflation expectations at levels consistent with this long-term goal.”
Scroll to continue
US stocks pared some of the earlier declines after the minutes were released at 2:00 PM ET, with the Dow Jones Industrial Average closing down 170 points during the session and the S&P 500 down 31 points.
CME مجموعة group FedWatch The tool now indicates a 47.5% chance of a further 75 basis point lift in September, with bets on a smaller 50 basis point move at 52.5%, close to the same levels in the immediate aftermath of the July rally but about 10 percentage points higher than a week ago.
“The Fed minutes show once again that controlling inflation is his top priority,” he said. Chris Larkin, Managing Director of E * TRADE by Morgan Stanley. “While it may not be as pessimistic as some investors hope to see it, there are indications that a slowdown in increases will be in the not-too-distant future.”
“Keep in mind that the minutes are before the big payroll win for July and the data that showed slowing inflation,” he added. “Data over the next month may determine how long the rally can extend as investors try to see what the Fed will decide in September.”
All that said, the US Treasury curve is still severely inverted – a case that preceded almost everything Recession Over the past 25 years – even like Federal GDP in Atlanta The forecast tool indicates that the economy is growing at a rate of 2.5%.
Meanwhile, the benchmark 10-year Treasury yield was little changed at 2.897% while the two-year note was pegged at 3.312%.
“Twitteraholic. Total bacon fan. Explorer. Typical social media practitioner. Beer maven. Web aficionado.”