The Minutes of the Federal Open Market Committee (FOMC) policy decision that took place over the July 26-27 policy meeting that may shed light on just how aggressive they expect to be have been released as follows:

• Fed minutes: All participants at July 26-27 policy meeting agreed 75-basis-point interest rate hike was appropriate.
• Some participants said the policy rate would have to reach a 'sufficiently restrictive' level to control inflation and remain there 'for some time.
• Participants 'concurred' that future rate hikes would depend on incoming information, and judged that 'at some point' it would be appropriate to slow the pace of increases.
• Participants agreed there was 'little evidence inflation pressures were subsiding and that it would take a considerable time for the situation to be resolved.
• Participants 'emphasized' that slowdown in demand would 'play an important role in reducing inflation.
• Participants noted recent readings on inflation expectations were 'consistent' with long-run expectations anchored at 2%.
• Participants said the strength of the labour market suggests economic activity is stronger than implied by weak Q2, raising the possibility of upward GDP revision.

Market reaction

US futures are pricing in a higher probability of a 50 bps hike for Sep after these minutes to around a 60% chance. The US dollar is lower as a consequence with the DXY dropping 25 points to 106.48. The 10-year yield is under pressure, dropping 0.8% to 2.888% and well off the 2.919% highs for the day. The 2-year yield dropped by nearly 1.4%. 

About the FOMC minutes

Investors look for clues regarding the policy outlook in this publication alongside the vote split. A bullish tone would be expected to provide a boost to the greenback while a dovish stance would be seen as USD-negative. It needs to be noted that the market reaction to FOMC Minutes could be delayed as news outlets don’t have access to the publication before the release, unlike the FOMC’s Policy Statement.

FOMC stands for The Federal Open Market Committee organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.