FOMC Officials Acknowledged Inflation Remained Elevated

The Federal Open Market Committee (FOMC) published the Minutes of the July meeting on Wednesday. "The information available at the time of the meeting indicated that inflation remained elevated. Labor market conditions remained stable, and real gross domestic product (GDP) continued to expand," the document reads.

The document also showed that, despite most participants supporting keeping interest rates unchanged, several favored a hike. Many participants judged higher rates would likely be necessary if inflation fails to decline, while a few opted out for an immediate hike, saying it could avoid the need for further increases later.

Fed officials noted that price increases over the past year were broad-based across services and goods, while the Fed Staff Economic Outlook showed the inflation outlook was similar to one prepared for the June meeting, but the economic outlook was a touch weaker.

Participants generally expected solid real GDP growth to continue in the near term and pointed to a few factors likely to support continued expansion, including ongoing AI-related investment and household spending. Participants acknowledged that, while the economy had demonstrated resilience to date, uncertainty surrounding the economic outlook remained elevated, partly due to the conflict in the Middle East.

Other than that, various participants noted that their overall assessments of the economy were little changed given the short interval between the June and July meetings. Chairman Kevin Warsh observed that six scheduled meetings per year, held roughly every two months, would allow more information to accumulate between meetings than under current practice and provide policymakers and the staff more time to consider strategic monetary policy issues. Still, no decision was made, and the 2026 schedule remains unchanged.

Market reaction

The US Dollar remains under selling pressure following the announcement, weighed by an early announcement from the United States (US) Treasury Department that it will increase the size of government debt repurchases by at least double. The US Dollar Index (DXY) trades around the 98.90 level after the FOMC Minutes.