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The Federal Open Market Committee Takes a Step Back in July

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The Federal Open Market Committee Takes a Step Back in July PART 1 OF 7

Your Update on the FOMC July Meeting

US interest rates unchanged

In its July meeting, the Federal Open Market Committee (or FOMC) decided to maintain its target range for the federal funds rate at 1%–1.25%, in line with the market’s expectations.

The FOMC’s statement was released after a two-day meeting that concluded on July 26, 2017. According to the statement, monetary policy would remain accommodative to further strengthen labor market conditions and maintain inflation near the 2% rate.

Your Update on the FOMC July Meeting

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There was a change in tone regarding the balance sheet’s unwinding, with the FOMC stating that the process of balance sheet normalization would begin soon. Markets (SPY) may now believe that the Fed will start trimming its balance sheet as early as September 2017.

There was no press conference after the FOMC’s meeting. The chart above is a summary of the FOMC’s recent decisions.

Economic projections remain the same

There was no change to economic projections in the FOMC’s meeting, but the cautious tone regarding US inflation (TIP) induced volatility (VXX) in the markets.

The probability of another rate hike from the US Federal Reserve in 2017 fell to 55% from its level of 60% before the statement, according to a Reuters poll. After the policy statement was released, US equity markets (QQQ) rose, yields on US bonds (BND) turned negative, and the US dollar (UUP) fell against its major trading partners.

Series overview

In this series, we’ll analyze the FOMC’s July statement in depth to understand its implications on the markets.

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