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Aug 18 - 10:55 AM

USD: What Did We Learn From The July FOMC Minutes - BofA

By eFXdata  —  Aug 18 - 09:37 AM

Bank of America Global Research discusses its reaction to yesterday's FOMC minutes from the July meeting.

"A slower pace of rate hikes is likely the base case. While there is some disagreement on the committee regarding whether the policy rate has reached neutral, there appears to be consensus on leaning toward smaller incremental rate hikes going forward. The minutes state, “participants judged that, as the stance of monetary policy tightened further, it likely would become appropriate at some point to slow the pace of policy rate increases while assessing the effects of cumulative policy adjustments on economic activity and inflation.” The use of “at some point” leaves the door open to larger rate hikes after the policy rate has reached neutral, as does the emphasis on data dependence elsewhere in the minutes, but the signal is clear enough," BofA notes. 

"The Fed throws some cold water on a “pivot.” At various points following the July FOMC meeting, financial markets have been inclined to price rate cuts shortly after the end of the tightening cycle as talk of a “Fed pivot” arose. By pivot, we mean a change in the current reaction function, which is likely to lean against strong activity, to a more traditional reaction function whereby the Fed is inclined to ease in light of weaker activity and labor market data," BofA adds. 

BofA Global Research


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