Economics week ahead

U.S. week ahead

FOMC Meeting Minutes • Wednesday

We will look to next week's FOMC minutes for any signs of what could shift a divided Committee from a hold toward rate hikes. The dot plot from the last meeting made clear that policymakers are split on whether rate hikes are warranted, but with forward guidance getting tamped down under Chair Warsh, the Fed's reaction function remains uncertain in terms of what exactly would build broader support for more restrictive policy.

We will be looking to whether a majority of participants view the recent pickup in inflation as persistent enough to warrant additional tightening or as primarily a temporary supply-shock. We will also be interested to see the extent to which Committee members view the labor market/the demand side of the economy as an inflationary problem.

While the minutes may lean hawkish, we continue to view recent inflation strength as being driven largely by supply side factors, including tariffs and energy, that should fade over time. Since the June meeting, oil prices have fallen further, which should help ease concerns that energy-related inflation will broaden further. And the June employment report showed no signs that the labor market is overheating or contributing to broader inflationary pressures. We thus continue to expect the FOMC to keep the funds rate on hold for the foreseeable future.

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