July FOMC Review

Notes From The Statement

At their July rates meeting the Federal Reserve opted to maintain policy at current levels, in line with market expectations. With no updating of the FOMC forecasts and no press conference, the only means of communication available at this meeting was the statement accompanying the decision.

The Fed struck a positive tone in the statement noting that near term economic risks have diminished with economic activity expanding at a moderate pace and labour market having strengthened.  Inflation however was noted as remaining low and likely to remain so in the near term though expected to rise to the Fed’s 2% target in the medium term as transitory effects fade.

Household spending was noted to be growing strongly though Business fixed investment remains soft.

Referring to the rate path the Fed noted that they still see only gradual increases in the federal funds rate as being appropriate though the actual rate path will depend on incoming data.

One further bullish development was seen in the voting split which changed from unanimously in favour of keeping rates on hold to 9-1 in favour of rates on hold with Kansas City Fed’s George voting in favour of a hike at this stage.


In all, the meeting passed as expected with the Fed citing some small improvement in the outlook, downplaying Brexit risks and confirming their data-dependant stance.  USD spiked initially in response to the statement though fell lower shortly after. With no reference to the potential timing of any rate move markets are still left split between a September and December date. Traders now await the release of the FOMC meeting minutes on August 17th for further details.