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Why June FOMC Meeting Minutes Dampened Hawkish Sentiment

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Why June FOMC Meeting Minutes Dampened Hawkish Sentiment PART 1 OF 4

Can Low Inflation Mute FOMC’s Hawkish Stance?

June FOMC meeting minutes

The June FOMC meeting minutes were released on Wednesday, July 5. The FOMC meeting minutes are a detailed transcript of the proceedings that took place on June 14–15, after which the FOMC announced a rate hike of 0.25%, taking the US target rate to 1.125%. The FOMC releases these meeting minutes three weeks after the meeting date, and they give investors an idea about the thought process that led to the committee’s decisions.

Can Low Inflation Mute FOMC&#8217;s Hawkish Stance?

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FOMC members’ view on the Q1 slowdown

As per the June meeting minutes, FOMC members were concerned about the progress of inflation in the recent quarter. Most of the officials believed that the slowdown in inflation and growth in the last quarter was transitory. They viewed this slowdown as an exception to the expansionary cycle that the US economy is currently in, while some of the members highlighted the risks of rising inflation (TIP) if the jobless rate continues to fall. The minutes also highlighted the discussions surrounding the balance sheet shrinkage, which we’ll discuss in more detail in the next part of this series. Overall, the minutes strengthened the doubts that markets (SPY) had about the Fed’s hawkishness and added to the uncertainty about the Fed’s future course of action.

Series overview

In this series, we’ll discuss the Fed’s plan for its balance sheet shrinking and how the June meeting minutes have impacted the equity (VTI), currency (UUP), and fixed income markets (BND).

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