The three most interesting aspects of the minutes from the July FOMC meeting centered on the balance sheet, inflation and financial conditions, points out the analysis team at Nomura.
Key Quotes
“Overall, markets perceived the minutes as mildly dovish. We maintain our forecast that the next hike will take place in December meeting. However, we think the minutes marginally lowered the likelihood of a December rate hike.”
“The greatest consensus appeared to be on the balance sheet. While some members were ready to announce the balance sheet adjustment at the July meeting, “most preferred to defer that decision until an upcoming meeting”, i.e., September. This supports expectations of an announcement of the balance sheet adjustment at the upcoming meeting next month on 19-20 September.”
“Regarding signs of the Committee’s thinking behind future rate hikes, the minutes conveyed a robust debate on the interpretation of the recent soft readings of inflation, and hence on the inflation outlook. Recall that at the July FOMC meeting, the participants had not seen the most recent inflation print (for July) which showed that a single item, lodging away from home, accounted for nearly all of the downside surprise for core CPI inflation.”
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