The Federal Reserve announced on Wednesday the minutes of the FOMC monetary policy meeting last month, showing that officials are waiting for more economic data to gain confidence in cutting interest rates. Nick Timiraos, a journalist from The Wall Street Journal known as the “mouthpiece of the Federal Reserve,” analyzed that although Federal Reserve officials have hinted that they are not in a hurry to cut interest rates, the possibility of a rate cut in September is still open.
The minutes of the meeting showed that officials were aware of signs of a slowdown in the US economy. However, despite inflation moving in the right direction, it is not enough to start reducing interest rates. More information is needed to gain confidence in a rate cut.
Officials at the meeting believed that monetary policy should be prepared to respond to unexpected economic softness, while also listing some economic data to support the continued decline in inflation over the next year. These include slowing wage growth, reduced pricing power for businesses, and increased consumer sensitivity to rising prices.
Overall, this is consistent with the position earlier released by Powell. However, the minutes of the meeting showed that because inflation remains high, Federal Reserve officials did not have enough confidence in a rate cut at the last meeting. Some decision-makers argued that signs of a potential faster softening in the labor market should be closely monitored.
Nevertheless, Nick Timiraos pointed out that the minutes of the meeting showed that officials were generally satisfied with their wait-and-see stance on interest rate changes, and combined with the recent public remarks by Federal Reserve officials, this indicates that the possibility of a rate cut in September is still open.
The interest rate dot plot released last month showed that if inflation slows and economic growth remains stable but not remarkable, most Federal Reserve officials expect one or two rate cuts this year. The focus of the market is whether the Federal Reserve may lay the groundwork for a rate cut at the meeting on July 30 to 31 for the September meeting.
After the release of the minutes, the CME Fed Watch tool showed that the market expects a 68.4% probability of a 1-point rate cut to between 5% and 5.25% in September, up from 61.5% yesterday. The probability of maintaining the interest rate unchanged in September has decreased from 32.8% to 25.7% today.
Source: CME
Stocks continue to rise, while the dollar continues to fall
The US stock market closed early on Wednesday for Independence Day, with the major indices mostly rising, and the S&P and Nasdaq hitting new highs, continuing their recent gains:
The Dow Jones Industrial Average fell 23.85 points or 0.06% to close at 39308.00 points.
The S&P 500 rose 28.01 points or 0.51% to close at 5537.02 points.
The Nasdaq rose 159.54 points or 0.88% to close at 18188.30 points.
The Philadelphia Semiconductor Index rose 106.73 points or 1.92% to close at 5651.72 points.
However, despite the market’s expectation of increased odds of a rate cut in September, the dollar continued to weaken, with Bitcoin falling below $58,000 this morning, plunging to as low as $57,800, the lowest since early May, and is currently trading at $58,818, a 24-hour drop of 4.23%. Ethereum also fell by 4.92% to $3,216, and mainstream altcoins experienced declines ranging from 5% to 11%.
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