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Fed Minutes to be released, spotlighting hawkish split after July meeting
The Fed held the fed funds target at 3.5% to 3.75% in July, while three officials voted for a 25 bps hike, and July data since the meeting have pointed to moderating inflation alongside weaker jobs.
The Federal Reserve will release the Minutes from its July Federal Open Market Committee meeting on Wednesday, a move expected to help investors gauge how deep the hawkish split runs within the central bank. FXStreet reports the Minutes will be scrutinized for whether a bias toward higher rates extended beyond the three officials who backed a hike.
At the July meeting, the Fed left the fed funds rate unchanged in the 3.5% to 3.75% range, but three officials, regional Fed Presidents Lorie Logan, Beth Hammack and Neel Kashkari, voted for a 25 basis point increase. FXStreet notes that the July policy statement was broadly similar to June and did not provide explicit guidance on future decisions.
The report says attention will focus on the arguments made for higher rates, including the view that supply shocks and increased investment tied to artificial intelligence could keep inflationary pressures elevated. It also points to the labor market as a factor some policymakers may have used to justify prioritizing a return of inflation to the Fed's 2% target.
FXStreet adds that the macro backdrop has shifted since July, with July CPI and PPI data indicating moderating inflation and the latest employment report showing a larger deterioration in labor conditions, including an unexpected decline of 23,000 jobs in July and downward revisions to prior months. It says those developments have strengthened the case for patience, while Wells Fargo expects the Minutes to reflect that most members remain willing to wait for more progress on inflation.