The minutes from FOMC meeting on July 25-26 signal a clear division within the committee regarding the path of future monetary tightening, with a slight inclination towards a hawkish stance.
Despite this, market anticipation for immediate rate adjustments remains tepid. Fed fund futures indicate an 86.5% chance that Fed will maintain the status quo in September, with less than 50% probability of a rate hike by year-end.
On the stock front, NASDAQ felt the heat, declining by 1.15%, possibly reacting to Fed’s deliberations.
Within the minutes, one point was underscored: “With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation.”
Yet, counterpoints highlighted potential economic vulnerabilities and concerns about unemployment, with some members noting, “there continued to be downside risks to economic activity and upside risks to the unemployment rate.”
Additionally, a number of participants judged that risks to achieve inflation target “had become more two sided”, and wanred of the risk of “inadvertent overtightening of policy against the cost of an insufficient tightening.”
