No Clear Direction From Fed Minutes

The U.S. Federal Open Market Committee Meeting has approximately eight meetings a year. Three weeks following the meetings, the minutes are released. These detailed discussions are then dissected by investors and analysts, trying to find clues behind the Fed’s official statements.

The minutes of the June meeting were of particular interest given that some Fed officials, concerned about rising inflation, gave indications of ending stimulus earlier than expected, stating two rate hikes could happen by 2023. The announcement shook not only equities but also sent the dollar sharply higher and commodity prices lower. Fed Chair Jerome Powell quickly sought to reassure markets that the central bank would not be rushing to hike rates, stating that inflation was temporary.

There was no clear direction from the minutes. Instead, the notes showed that while the Fed wasn’t ready to taper bond purchases—which are over $120 billion per month—there were indications that the time may be approaching. After analyzing inflation metrics and employment data, Fed officials are divided on their outlook and the appropriate course of action.

One item to note. While 13 of 18 officials projected they would raise interest rates by 2023, seven expected to raise rates next year. This diverged from the March meeting when most officials expected to hold rates steady through 2023. Clearly the consensus is moving toward ending monetary easing sooner than later.

The Fed’s next meeting at the end of July will be closely watched as investors again try to decipher the central bank’s next moves.