The Federal Reserve will share details of the June meeting that may illuminate what policymakers debated on the short-term interest rate path amidst a slowing economy and surging inflation.
Fed chair Jerome Powell said another hike of 50 to 75 basis points is possible in July. He made this remark in a press conference on June 15 after rising 75 basis points, its largest hike since 1994.
Many policymakers are open to making another big decision to curb the most significant price rise seen in 40 years in the Fed meeting later in July. They include Fed Governors Christopher Waller, Michelle Bowman, and regional Fed Presidents Loretta Mester, Charles Evans, and Mary Daly.
The quarterly projections of 18 Policymakers see median rates of the Federal Open Market Committee going up to 3.4% by the 2022 end and 3.8% in 2023, up from the current target of 1.5% to 1.75%. The committee will view the inflation expectations in detail, and the topic of discussion will be lengthy.
Inflation
In his press conference, Powell cited the University of Michigan preliminary survey on inflation expectation as one of the factors for policymakers to raise rates by 75 basis points. The initial estimates by Americans were 3.3 % in the next 5 to 10 years, but it was later revised to 3.1 % in the June 24 final report.
The chief market strategist of MetLife Investment Management, Drew Matus, asked if the Fed was more influenced by the consumer’s expectation, primarily driven by energy and food prices or the professionals’ forecasters and the market, which suggest they have issues under control.
According to Powell, this is not the time for nuanced readings on inflation. Any discussion on the price dynamics will be necessary considering the increasing divergence between the consumer price index and the Fed’s measure of inflation based on personal consumption.
The minutes of the June meeting can also throw insights into how the FOMC views the decline in economic activity. Several forecasters on Wall Street have lowered their second-quarter growth estimates. Atlanta’s popular tracking estimates show a contraction even as the labor market stays strong.
Powell said that the fight against high inflation would be unconditional, but the committee said that they would have a range of views and, if necessary, adjust the data’s plans softer.
Odds of Recession Rises
The odds-on recession in the US in the next 12 months is 38% as per Bloomberg economics latest forecast after interest rates surged and consumer sentiment took a hit.
The participants in FOMC are not recognized by name; the meeting minutes give insight into whether the committee shared the concerns of Esther George, the fed chief of Kansas City, whose dissent against the hike of 75 basis points surprised Wall Street. In the previous years, George was a hawk and only favored tighter monetary policy.
