FOMC minutes: Some officials favor 25 basis point hike at June meeting

• The Federal Reserve released the Minutes of its June 13-14 meeting.
• The Minutes showed that some policy makers were in favor of a rate hike but opted for a pause.
• The dollar falls slightly after the publication of the minutes.

He Federal Open Market Committee (FOMC) published the minutes of its June meeting, provoking a limited reaction in financial markets. According to the document, some officials were in favor of a rate hike at the meeting, but favored a pause. The Minutes showed a split among the FOMC members.

In June, the Federal Reserve (Fed) kept the interest rate unchanged at 5.00% – 5.25%, as expected. In the projections, members see more rate hikes before the end of the year. The minutes show that “nearly all participants indicated that additional hikes in the federal funds target rate during 2023 were deemed appropriate in their economic projections.”

“Most participants noted that uncertainty about the outlook for the economy and inflation remained high and that additional information would be valuable in considering the appropriate stance of monetary policy,” the minutes noted.

Main conclusions of the Minutes:

“Participants generally noted that banking tensions had subsided and conditions in the banking sector had much improved since early March.”

“The economy was facing headwinds from tightening credit conditions, including rising interest rates, for households and businesses, which would likely weigh on economic activity, hiring and inflation, although the The extent of these effects remained uncertain. Against this background, and taking into account the significant cumulative tightening of the monetary policy stance and the lags with which the policy affects economic activity and inflation, almost all participants considered it appropriate or acceptable to maintain the band at this meeting. target for the federal funds rate between 5% and 5-1/4%. Most of these participants noted that leaving the target range unchanged at this meeting would give them more time to assess the economy’s progress toward the Committee’s goals of maximum employment and price stability.”

“Some participants indicated that they were in favor of raising the target range for the federal funds rate 25 basis points at this meeting or that they might have supported such a proposal.”

“Participants favorable to a 25 basis point increase signaled that the labor market remained very tight, momentum in economic activity had been stronger than previously anticipated, and there was little clear indication that inflation was on track to return to the Committee’s 2% target over time.”

“Nearly all participants indicated that, in their economic projections, they believed additional increases to the federal funds target rate would be appropriate during 2023.”

“Most participants noted that uncertainty about the outlook for the economy and inflation remained high and that additional information would be valuable in considering the appropriate stance of monetary policy.”

“Many also noted that, after rapidly tightening last year, the Committee had slowed the pace of tightening and that further easing in the pace of policy tightening was appropriate to provide additional time to observe the effects. cumulative tightening and assess its implications for policy.”

Market Reaction:

The dollar appreciated after the publication of the minutes. The DXY posted fresh weekly highs above 103.30 and EUR/USD fell towards 1.0850.