FOMC Minutes

Published at 14:00 EDT

Key for me are the following…

Participants anticipated that U.S. real GDP
would expand in the second half of the year, but many
expected that growth in economic activity would be at a
below-trend pace, as the period ahead would likely see
the response of aggregate demand to tighter financial
conditions become stronger and more broad based…

Participants anticipated that this slowdown in housing activity would continue and also expected higher borrowing costs to lead to a slowing in other interest-sensitive household expenditures, such as purchases of durable goods.
With respect to the business sector, participants noted…

(Joe’s paraphrasing) reduced capital spending and some indications - mostly from intra-district surveys – that said softening of economic activity and loosening of employment was visible. Most thought that an increased labor participation rate is not going to happen as much is tied to baby-boomer retirements.

There were thoughts expressed that food and especially rent inflation will be persistent and affect household spending adversely. Increased lay offs were not predicted as employers surveyed were fixed on keeping employees but labor costs to do that were not increasing.

But the usual backward looking committee said…

inflation remains high
employment remains tight therefore…

all participants agreed that it was appropriate to raise the target range for the federal funds rate 75 basis points at this meeting and to continue the process of reducing the Federal Reserve’s securities holdings, as described in the Plans for Reducing the Size of
the Federal Reserve’s Balance Sheet that the Committee
issued in May.

Participants observed that, following this
meeting’s policy rate hike, the nominal federal funds rate
would be within the range of their estimates of its
longer-run neutral level.

but not all

Even so, with inflation elevated and expected to remain so over the near term, some participants emphasized that the real federal funds rate would likely still be below shorter-run neutral levels after this meeting’s policy rate hike.

…participants judged that moving to a restrictive stance of policy was required to meet the Committee’s legislative mandate…

And so…future increases appropriate(but size of increase depends on data to come) …

Only hint of policy softening here (bold by me)

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. Some participants indicated that, once the
policy rate had reached a sufficiently restrictive level, it
likely would be appropriate to maintain that level for
some time to ensure that inflation was firmly on a path
back to 2 percent.

The broad market liked this a little but only blipped +0.7% (SPX) until 14:20 then gave it all back up by 15:05…
who thinks we’ve rolled over - heading for SPX 4100 ish

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