The Federal Reserve will publish minutes of its July policy decision Wednesday as analysts and investors look for clues as to the central bank's next move on interest rates and its forecast for a so-called soft landing for the world's biggest economy.
The Fed last month lifted its benchmark lending rate by a 0.25 percentage point, taking it to a 22-year high of between 5.25% and 5.5%. The central bank also reiterated that further increases will likely be needed to bring inflation back to its 2% target.
Fed Chairman Jerome Powell suggested, however, that the central bank may be at or near the end of what has been the most aggressive tightening cycle in four decades.
"We’ve raised the federal-funds rate now by 525 basis points [5.25 percentage points] since March 2022," Powell told reporters yesterday in Washington. "Monetary policy, we believe, is restrictive and is putting downward pressure on economic activity and inflation."
Inflation Data Have Been Mixed
Since then inflation data have been mixed, with a softer-than-expected headline consumer reading of 3.2% for July paired against quickening factory-gate price increases and a surge in July retail sales.
The labor market also remains historically tight, with a headline unemployment rate of around 3.5% -- the lowest in five decades -- and average hourly earnings growing at around 5.1%.
The broader economy, meanwhile, is growing at a 5% clip, according to the Atlanta Fed's GDPNow forecasting tool, following on from its 2.4% advance over the three months ending in June.
Rate traders see little chance of a follow-on rate hike from the Fed in September. CME Group's FedWatch tool indicates a 90.5% chance that rates will remain steady, with bets on a final 2023 increase pegged at 29.5% for November and 27.5% for December.
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