The minutes of the July 31-August 1 FOMC minutes revealed nothing that the markets didn’t know. Fed is going to raise the fed fund rate again in September, by 25bps to 2.00-2.25%. The minutes noted that “, any participants suggested that if incoming data continued to support their current economic outlook, it would likely soon be appropriate to take another step in removing policy accommodation.”
Stimulus remove is going to continue gradually as “participants generally expected that further gradual increases in the target range for the federal funds rate would be consistent with a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.”
Risks for economic forecasts are “balanced”. On the upside, ” household spending and business investment could expand faster over the next few years than the staff projected, supported in part by the tax cuts enacted last year”. On the downside, “trade policies could move in a direction that would have significant negative effects on economic growth”
Flattening of yield curve is a concern among some policy makers. “Several participants cited statistical evidence for the United States that inversions of the yield curve have often preceded recessions”. But, “other participants emphasized that inferring economic causality from statistical correlations was not appropriate.”
