FOMC minutes: Rate would have to reach a 'sufficiently restrictive' level to control inflation

The Minutes of the Federal Open Market Committee (FOMC) policy decision that took place over the July 26-27 policy meeting that may shed light on just how aggressive they expect to be have been released as follows:

• Fed minutes: all participants at July 26-27 policy meeting agreed 75-basis-point interest rate hike was appropriate.
• Some participants said policy rate would have to reach a 'sufficiently restrictive' level to control inflation and remain there 'for some time'.
• Participants 'concurred' future rate hikes would depend on incoming information, judged that 'at some point' it would be appropriate to slow pace of increases.
• Participants agreed there was 'little evidence' inflation pressures were subsiding and that it would take considerable time for situation to be resolved.
• Participants 'emphasized' that slowdown in demand would 'play an important role' in reducing inflation.
• Participants noted recent readings on inflation expectations were 'consistent' with long-run expectations anchored at 2%.
• Participants said strength of labor market suggests economic activity stronger than implied by weak q2, raising possibility of upward GDP revision.

More to come...

US futures are pricing in a higher probability of 50 bps hike for Sep after these minutes to around a 60% chance. 

About the FOMC minutes

Investors look for clues regarding the policy outlook in this publication alongside the vote split. A bullish tone would be expected to provide a boost to the greenback while a dovish stance would be seen as USD-negative. It needs to be noted that the market reaction to FOMC Minutes could be delayed as news outlets don’t have access to the publication before the release, unlike the FOMC’s Policy Statement.

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.