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Investing.com – Wednesday will shed some light on the discussions at their June meeting that left markets scratching their heads.
The Federal Open Market Committee paused rate increases after 10 consecutive moves spanning 15 months, even as inflation eased more slowly than expected. At the same time, policy makers expected two more hikes this year, more than expected, a baffling result that left investors searching for answers.
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Federal minutes.. What is expected?
Investors are looking forward to today during the past month, in which a price range was fixed at 5% and 5.25%, to anticipate more about monetary policy during the coming period.
“The Fed minutes are likely to reveal a lively debate among Fed members as there is still more to come in interest rate increases,” said Clifford Bennett, chief economist at ACY Securities.
The Federal Open Market Committee will release the minutes of its meeting from June 13-14 at 21:00 KSA. Investors expect the central bank to resume its tightening campaign in July after it indicated the need to raise interest rates by at least a quarter point before the end of the year.
The world’s major central banks raised their YTD interest rates in June, surprising the markets, but still see the need for further tightening ahead as policy makers struggle to gain the upper hand in the battle against inflation.
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New raise at the next meeting?
Kathy Postogenich, chief economist, Nationwide Life Insurance Co. “The minutes may provide insight into that, but it may make the same comments that Powell made before.”
Powell said Fed officials want more time to assess economic data in light of previous strong increases as well as tightening credit after bank failures in March.
He said last week that the vast majority of the committee expected two or more increases and would not rule out increases in successive meetings. Derek Tang, an economist at LH Meyer/Monitory Policy Analytics, said the minutes could reinforce market expectations for a fresh hike at the next meeting.
“With inflation risks continuing to skew to the upside, we expect the Fed to continue its hawkishness ahead of the July 25-26 meeting,” say Bloomberg Economics economists.
Inclination towards hawks
The Fed will have two major economic reports ahead of its July 25-26 meeting: the employment report for June on Friday and the inflation report for the same month on July 12.
Commerce Department figures on Friday showed that the personal consumption expenditures price index rose in May at the slowest annual pace in more than two years.
But policymakers have been more focused on basic prices, which exclude food and energy. Which increased by 4.6% from May 2022, compared to 3.8% for the broader gauge.
“The problem is that the economy continued to beat expectations and inflation proved flat, which could keep the FOMC hawkish for some time,” said Rubila Farooqui, chief US economist at High Frequency Economics.
Another key will be the committee’s assessment of lending terms, which are seen as a headwind to growth after bank failures.
“If lending conditions don’t tighten as expected, that would be a good reason to introduce two more hikes at the next couple of meetings,” said Jonathan Millar, chief economist at Barclays (LON:) Capital in New York.
2023-07-05 09:28:00
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