The statement from the July FOMC meeting was very little changed compared with the previous meeting in mid-June but it included an important 'some' in anticipation of the first rate hike: 'The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term'.
In our view, this suggests the FOMC is not far from the first rate hike and we see the statement as consistent with an FOMC that remains on track to deliver a 25bp rate hike at the next meeting in September.
Nevertheless, the incoming data ahead of the meeting is decisive for our call and for the Fed to deliver the expected rate hike, we need continued progress in the labour market and indications that wage inflation is picking up or/and core inflation is bottoming. Over the next two weeks, the most important data releases will be the July employment report, the Q2 Employment Cost Index and GDP growth. Overall, we continue to expect solid US data in coming months, with a faster improvement in labour market slack than the FOMC projects and a pickup in wage inflation.
Otherwise, the statement was almost unchanged compared with the previous meeting in mid-June. The forward-looking paragraph was the same as in June and the FOMC continues to describe the risk to the economic outlook as 'nearly balanced'.
Regarding the description since the last meeting, it was added that 'the labour market continued to improve, with solid job gains and declining unemployment. On balance, a range of labour market indicators suggests that underutilisation of labour resources has diminished since early this year'. The description of inflation was unchanged from June apart from the deletion of 'energy prices appear to have stabilised'.
The statement had limited market impact and financial markets continue to price roughly 50% probability of a first rate hike in September.
In our view, this suggests the FOMC is not far from the first rate hike and we see the statement as consistent with an FOMC that remains on track to deliver a 25bp rate hike at the next meeting in September.
Nevertheless, the incoming data ahead of the meeting is decisive for our call and for the Fed to deliver the expected rate hike, we need continued progress in the labour market and indications that wage inflation is picking up or/and core inflation is bottoming. Over the next two weeks, the most important data releases will be the July employment report, the Q2 Employment Cost Index and GDP growth. Overall, we continue to expect solid US data in coming months, with a faster improvement in labour market slack than the FOMC projects and a pickup in wage inflation.
Otherwise, the statement was almost unchanged compared with the previous meeting in mid-June. The forward-looking paragraph was the same as in June and the FOMC continues to describe the risk to the economic outlook as 'nearly balanced'.
Regarding the description since the last meeting, it was added that 'the labour market continued to improve, with solid job gains and declining unemployment. On balance, a range of labour market indicators suggests that underutilisation of labour resources has diminished since early this year'. The description of inflation was unchanged from June apart from the deletion of 'energy prices appear to have stabilised'.
The statement had limited market impact and financial markets continue to price roughly 50% probability of a first rate hike in September.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD retreats to 1.0750, eyes on Fedspeak
EUR/USD stays under modest bearish pressure and trades slightly near 1.0750 on Wednesday. Hawkish comments from Fed officials help the US Dollar stay resilient and don't allow the pair to stage a rebound.
GBP/USD struggles to hold above 1.2500 ahead of Thursday's BoE event
GBP/USD stays on the back foot and trades in negative territory below 1.2500 after losing nearly 0.5% on Tuesday. The renewed US Dollar strength on hawkish Fed comments weighs on the pair as market focus shifts to the BoE's policy announcements on Thursday.
Gold fluctuates in narrow range below $2,320
After retreating to the $2,310 area early Wednesday, Gold regained its traction and rose toward $2,320. Hawkish tone of Fed policymakers help the US Treasury bond yields edge higher and make it difficult for XAU/USD to gather bullish momentum.
SEC vs. Ripple lawsuit sees redacted filing go public, XRP dips to $0.51
Ripple (XRP) dipped to $0.51 low on Wednesday, erasing its gains from earlier this week. The Securities and Exchange Commission (SEC) filing is now public, in its redacted version.
Softer growth, cooler inflation and rate cuts remain on the horizon
Economic growth in the US appears to be in solid shape. Although real GDP growth came in well below consensus expectations, the headline miss was mostly the result of larger-than-anticipated drags from trade and inventories.