Fed meeting minutes to offer clues on future rate hike appetite

The minutes of the Federal Reserve’s June policy meeting, which will be issued on Wednesday, are expected to indicate an intense discussion among officials who, on balance, look inclined to favour stronger action to reduce inflation.

The meeting minutes, which are scheduled at 2 p.m. EDT (1800 GMT), will arrive after US central bank officials have spent the previous three weeks sketching out their policy outlooks following the June Federal Open Market Committee meeting. Key officials, such as Fed Chair Jerome Powell, have referred to estimates made at that meeting, indicating that a half-point tightening this year was still very much in play.

“The committee clearly believes that there’s more work to do, that there are more rate hikes that are likely to be appropriate” at some point over the course of the year, Powell said last Wednesday in an appearance with other central bank chiefs in Portugal. “Although policy is restrictive, it’s not, it may not be restrictive enough and it has not been restrictive for long enough,” which keeps alive prospects for more increases, Powell said.

However, some believe that enough has been done. Last Thursday, Atlanta Fed President Raphael Bostic stated that no further rate rises are required, stating that “the data, survey results, and on-the-ground intelligence constitute a reasonable case that gradual disinflation will continue.” “That will happen even if the Committee does not raise the federal funds rate,” he continued.

The minutes will detail the discussions that permitted the Fed to keep its overnight target rate at between 5% and 5.25% after just over a year of rapid rate hikes. It was near zero in March 2022 and has since climbed rapidly as Fed officials have attempted to contain the highest levels of inflation in decades.

The Fed stayed steady on June 14, largely to assess the impact of the hikes it has already imposed. Some central bankers have recently observed that the impacts of previous tightening are still being felt in the economy.

The meeting minutes will also include details about what policymakers and their staff foresee for the economy, and some are particularly interested in the central bank staff’s perspective. Fed economists have been warning about the possibility of a recession for some time, and have recently published a series of papers sounding cautious notes about various aspects of the economy and financial system.