FOMC July meeting minutes indicate towards ongoing rate rises

FOMC July meeting minutes were released today. The minutes indicate towards ongoing rate rises, noted TD Economics in a research report. FOMC participants noted the recent strength in economic growth and expressed confidence in the economic outlook, while recognizing the downside risk posed by trade tensions.

Participants noted that inflation is holding close to 2 percent and saw the risks to the outlook as generally balanced. With respect to the effect of tariffs, members noted the countering effects of higher tariffs and lower agriculture prices.

With projections being met for ongoing stable growth, “participants generally expected that further gradual increases in the target range for the federal funds rate would be consistent with a sustained expansion of economic activity."

Moreover, participants showed some worry regarding the effect of fiscal stimulus and its potential unwind on the medium term economic outlook. The participants, as in past meetings, debated the impacts of a flattering yield curve, with some members cautioning that an inverted yield curve tended to precede recessions. Others warned against inferring causation, noting the myriad global forces weighing on term premiums that might be distorting the signal, noted TD Economics in a research report.

The minutes’ message is that trade and fiscal policy uncertainties continue to be subordinate to the strength coming through in the economic data. As long as this continues to be the case, the U.S. Fed is expected to continue to nudge up its policy rate at a quarterly frequency, stated TD Economics.

“We will be paying close attention to these discussions. Changes in the composition of the balance sheet would likely have some effect on the slope of the yield curve that remains such a hot topic for FOMC members”, added TD Economics.

At 20:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -134.399. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex