Please see below article received from EPIC Investment Partners this morning, which provides a detailed overview of the FOMC meeting last month.
The minutes released yesterday from last month’s FOMC meeting offered little new insight to the path for future rate hikes, reiterating the Fed’s data-dependent stance. They did, however, show that two Fed officials favoured holding rates steady last month – others saw significant upside risks to inflation that could require further tightening.
The minutes noted that “uncertainty about the economic outlook remained elevated and agreed that policy decisions at future meetings should depend on the totality of the incoming information and its implications for the economic outlook and inflation, as well as for the balance of risks. Participants expected that the data in the coming months would help clarify the extent to which the disinflation process was continuing, with product and labour markets reaching a better balance between demand and supply.”
In regards to the two officials favouring a pause, the minutes said: “A couple of participants indicated that they favoured leaving the target range for the fe deral funds rate unchanged or that they could have supported such a proposal. They judged that maintaining the current degree of restrictiveness at this time would likely result in further progress toward the Committee’s goals while allowing the Committee time to further evaluate this progress”.
There is uncertainty around the economic outlook though. “Participants noted that real GDP growth had continued to exhibit resilience in the first half of the year and that the economy had been showing considerable momentum. A gradual slowdown in economic activity nevertheless appeared to be in progress, consistent with the restraint placed on demand by the cumulative tightening of monetary policy since early last year and the associated effects on financial conditions,” the minutes noted.
Members acknowledged the tick down in inflation ahead of the meeting but remain concerned. They stated that “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy. Participants did cite several tentative signs that inflation pressures could be abating. Nonetheless, several participants commented that significant disinflationary pressures had yet to become apparent in the prices of core services excluding housing. Participants stressed that the Committee would need to see more data on inflation and further signs that aggregate demand and aggregate supply were moving into better balance to be confident that inflation pressures were abating, and that inflation was on course to return to 2% over time.”
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Chloe
17/08/2023