Minutes from the Federal Reserve’s July meeting are unlikely to materially shift market pricing for rate hikes, according to Citi, even though three Fed officials dissented against the decision to leave rates unchanged at that meeting. Those officials argued that rates should have been raised because core inflation was still running at 2.6%, above the Fed’s 2% target. Since then, newly released August data has weakened the case for additional tightening. July CPI data showed core prices, excluding food and energy, rose 2.5% year over year, the lowest reading since March 2021. At the same time, the July employment report showed the U.S. lost 23,000 jobs during the month. Citi’s chief U.S. economist Andrew Hollenhorst said the new figures would make it difficult for the meeting minutes to significantly alter market expectations, which have already moved toward lower odds of another hike. JPMorgan chief U.S. economist Michael Feroli said the minutes may offer insight into how much tolerance other FOMC members have for inflation running above target and how officials assess inflation pressure going forward.
At the Federal Reserve’s July meeting, three officials dissented from the decision to leave interest rates unchanged, arguing that the central bank should have raised rates because core inflation was still at 2.6%, above the Fed’s 2% target, according to BlockBeats on Aug. 20, citing Jin10.
Data released in August, however, has weakened the case for another increase. The July CPI report showed core prices, excluding food and energy, rose 2.5% from a year earlier, the lowest level since March 2021. Separately, the July jobs report showed the U.S. lost 23,000 jobs during the month.
Citi says the minutes may not materially change market pricing
Andrew Hollenhorst, chief U.S. economist at Citi Research, said the latest figures 「will make it difficult for the minutes to significantly change the market’s already reduced expectations for the probability of further rate hikes」.
He added that the minutes should give a clearer picture of how wide the divide was between hawkish and dovish officials during the July meeting.
JPMorgan focuses on tolerance for above-target inflation
The report said the minutes may also show how policymakers plan to define and assess inflation pressures going forward.
Michael Feroli, chief U.S. economist at JPMorgan, wrote that the minutes 「may give us a sense of how much tolerance other FOMC members have for inflation running above target」.
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