Fed Meeting Minutes Suggest Another 2023 Hike, But Markets Skeptical

The minutes of the Federal Reserve meeting from July suggest another hike in 2023 is possible, most likely in November. The Fed continues to make no mention of lowering rates in the near term and refer to “the extent of additional policy firming”, rather than any suggestion that rates could move lower.

However, the minutes did signal that we may be close to the top of the interest-rate cycle as the Fed looks to “balance the risk of an inadvertent overtightening of policy against the cost of an insufficient tightening”. There was also some encouraging signs that the Fed is becoming more optimistic on inflation as the minutes stated that “data arriving in coming months would help clarify the extent to which the disinflation process was continuing”. So far, since the Fed’s July meeting, that data, especially inflation data, has been broadly encouraging.