An account of the debate at the Federal Reserve’s July meeting, to be released later this week, will likely provide clues as to what could push the central bank to tighten again in September.
The decision by Fed officials at their July 26-27 meeting to raise their key interest rate for a second month in a row by 0.75% (75 basis points) marked the fastest rate of tightening since the early 1980s.
Since then, bets in financial markets on the size of the Fed’s next move in September have shifted between 50 and 75 basis points, following the release of macroeconomic data that first showed a stronger-than-expected labor market and then inflation below estimates.
The Fed’s minutes to be released on Wednesday probably won’t settle the matter, Bloomerg notes. But they could indicate what kind of data Bank officials will need to see in favor of another “unusually large” hike. For which Fed President Jerome Powell had said, at the press conference after the July meeting, that it might be on the table at the September meeting as well (20 – 21).
“If there is any new information, it will be around whether the next rate hikes are likely to be smaller in size gradually, or if the door is really open for something bigger,” Bank of America’s Michael Gapen told the agency.
“The cost-benefit analysis has now shifted in the direction of smaller increases – and the inflation data probably helped them with that. But if they see another strong labor market report it may be hard for them not to go for 75 basis points,” he added.
Source: Capital
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