- The minutes from the Federal Open Market Committee (FOMC) meeting in June were eagerly anticipated by investors, analysts, and economists for insights into the central bank’s interest rate hike trajectory.
- Despite most participants not expecting a rate change at the meeting, the minutes revealed a clear expectation of further tightening in future meetings.
- Almost all officials indicated that additional rate hikes would be appropriate in 2023, despite concerns about economic growth leading to a decision not to raise rates.
Decoding the FOMC’s June Meeting Minutes
Expectations and Realities of the Interest Rate Hike
The minutes of the FOMC’s June meeting were highly anticipated by the global financial community. The majority of those surveyed in the Open Market Desk’s Market Makers and Market Participants Surveys did not anticipate a rate change at this meeting. However, the “median path” derived from the surveys pointed to no rate change until the beginning of 2024. Despite this, there was a significant dispersion among participants, with a clear expectation of further tightening in future meetings.
Decision Against Rate Hike Amid Economic Growth Concerns
While most members believed that more rate hikes were on the way, policymakers decided against a rate hike due to concerns about economic growth. The perceived delayed effects of policy measures and other factors led decision-makers to see the decision not to meet for a rate hike in June, following ten consecutive rate hikes, as an opportunity. It was reported that almost all officials indicated that additional rate hikes would be appropriate in 2023, with some officials supporting a rate hike but accepting the decision to pause.
Projected Economic Slowdown and Moderate Recovery
Federal Reserve staff predicted a slight slowdown within the year, followed by a moderate recovery. The economy faced challenges due to tighter credit conditions, such as rising interest rates, affecting both households and businesses. These conditions were expected to have a negative impact on economic activity, employment, and inflation, but the exact magnitude of these effects remained uncertain.
Unanimous Decision Against Rate Hike
The decision not to raise interest rates was unanimous, taking into account a significant tightening of monetary policy and the delay in the policy’s impact on both economic activity and inflation. The minutes reported that core inflation did not show a decline since the beginning of the year. However, the minutes revealed differing views among members. According to projection materials presented after the June 13-14 session, the majority of 18 participants, except for two, believed that at least one rate hike would be appropriate within the year. Additionally, a total of 12 participants predicted that two or more hikes would be appropriate.
