FOMC Minutes Awaited For Rate Policy Clues Amid Inflation-linked Concerns

The US Federal Reserve will release its June 11-12 policy meeting minutes on Wednesday at 18:00 GMT. Investors will scrutinize the Fed’s hawkish hold and inflation outlook to gauge the timing of the expected interest rate cut this year.

The Fed maintained its monetary policy settings for the seventh consecutive meeting in June, as widely expected. In its policy statement, the US central bank said that while inflation has slowed recently and the jobs market has become more balanced this year, the uncertain economic outlook keeps the Fed “highlight attentive to inflation risks.”

The median FOMC member called for one 25 basis point cut by the end of this year and four 25 basis point cuts in 2025. Fed Chairman Jerome Powell noted that “we need further confidence, more good inflation readings but won’t be specific about how many to start rate cuts. We’ll also be looking at a balance of risks and outlook as well.” Unexpected weakness in the labor market could also call for a response.

Just a few hours before the Fed policy announcement, the US Bureau of Labor Statistics published the May inflation report, which showed that the core Consumer Price Index (CPI) increased 0.2% on the month and 3.4% from a year ago, compared with respective estimates of 0.3% and 3.5%. Since the May inflation report and the June policy announcement, several Fed policymakers remained wary about the inflation outlook, suggesting that rates could stay “higher for longer.”

However, dovish Fed bets returned on the table after data on June 28 showed that the core Personal Consumption Expenditures (PCE) Price Index rose at an annual pace of 2.6% in May after advancing 2.7% a month before.

Currently, markets see a 67% chance of the Fed lowering rates in September, a tad higher than about 63% seen before Powell’s commentary.

The FOMC minutes will also shed light on the Fed’s more cautious stance at the June meeting, though SEP projections might prove to be already somewhat stale.