July FOMC Meeting

By

Greg Barshied

Greg Barshied, Associate Portfolio Manager, discusses highlights from today’s FOMC Meeting that saw a 25bp hike, in-line with expectations.

  • Today’s meeting saw the Fed raise benchmark rates by 25bp to a 5.25-5.50% target, the highest level in more than 20 years.  The 25bp hike was widely anticipated by market participants, with investors carefully analyzing Chair Powell’s language regarding the potential for additional rate hikes and what pace those hikes might take.
  • Coming into today’s meeting, voting members were forced to digest data with mixed implications. June CPI cooled to 3.0% YoY, below expectations and showing that the prior magnitude and pace of hikes had begun to flow through the economy. However, resilient economic growth and a still-tight labor market coupled with significant YoY wage growth remain.
  • Market response following the release and subsequent speech from Chair Powell was muted, with equity markets hovering around unchanged. Fixed income markets saw modest gains.
  • With the next FOMC meeting set for September 20th, voting members will get two additional inflation datapoints measured by CPI (Aug 10th/Sep 13th) as well as two additional employment reports (Aug 4th/Sep 1st).
  • Chair Powell’s language did not signal a slowing pace of hikes, leaving the possibility of an additional 25bp hike at September’s meeting on the table.  The committee will continue to assess incoming economic data, while trying to balance doing too much and doing too little to bring inflation back to 2.0%.