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Federal Reserve's July Minutes Could Reveal Diverging Views On Interest Rates, While Investors Lean Dovish

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Federal Reserve's July Minutes Could Reveal Diverging Views On Interest Rates, While Investors Lean Dovish

Minutes from the Federal Reserve’s July meeting are set to be released at 2 p.m. ET Wednesday, and they will likely indicate that only a few officials were in favor of maintaining current interest rates for the rest of the year.

This insight was shared by Bloomberg economists Anna Wong and Stuart Paul on Wednesday ahead of the Federal Open Market Committee’s meeting minutes.

The minority of FOMC members who advocated for unchanged rates after July might have reservations due to a worsening credit landscape. Federal Reserve Chair Jerome Powell‘s slightly dovish remarks during the Fed’s most recent post-meeting press conference hint at his alignment with this group.

The latest remarks from various Fed officials suggest a potential shift in the unanimous support for the rigorous rate hikes seen over the last 18 months. For instance, Philadelphia Fed President Patrick Harker hinted at a possible halt in rate hikes, while Fed Governor Michelle Bowman expressed hawkish views.

Minneapolis Fed President Neel Kashkari stressed the importance of avoiding early loosening of monetary conditions that would be reminiscent of the 1970s.

Investors are leaning against another rate hike this year, with futures contracts indicating a mere 10% probability for a September rate increase and a 38% chance by November. The market predicts a 75% chance of the first rate cut by May 2024.

Recent economic reports, including a lower-than-expected wage growth study on July 28 and a declining unit labor cost report on Aug. 3, might influence the committee’s stance on future rate decisions, Bloomberg’s Wong and Paul noted.

Read now: US Stocks Set For Muted Open As Focus Shifts To FOMC Minutes: Why This Analyst Sees Possible Year-End Rally After Likely Pause

Market-Implied Odds According To Fed Futures (CME Group)


MEETING DATE DAYS TO MEETING EASE NO CHANGE HIKE
09/20/2023 35 0.00% 90.50% 9.50%
11/01/2023 77 0.00% 61.42% 38.58%
12/13/2023 119 8.15% 57.99% 33.86%
01/31/2024 168 23.73% 50.80% 25.48%
03/20/2024 217 46.08% 38.80% 15.12%
05/01/2024 259 75.62% 19.95% 4.43%
06/19/2024 308 83.53% 13.69% 2.78%
07/31/2024 350 92.87% 6.14% 0.99%
09/25/2024 406 97.47% 2.24% 0.28%
11/06/2024 448 98.86% 1.02% 0.12%
12/18/2024 490 99.59% 0.37% 0.04%

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo: Shutterstock.

 

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