Release Of Fed Minutes Supports July Hike

Minutes from the Federal Reserve’s June meeting at which rates were held steady pointed to higher rates this year, with perhaps the next hike coming at the July meeting. The Fed acknowledges that inflation has come down since mid 2022, but worries that it may remain stuck well above the Fed’s 2% target. Essentially without signs that inflation is coming down, the Fed is likely to maintain restrictive monetary policy. More hikes could be coming.

Recession Risk

The Fed is willing to see some reduction in economic growth to meet their inflation goal. That could mean a recession. Fed staff projections from June called for a “mild recession” in 2023 as the most likely case, but also with a fair chance that that economy continues to grow. Indicators such as an inverted yield curve continue to imply a recession may occur. The Fed also thinks that the “very tight” labor market is encouraging, and in fact, some softening of the labor market may be needed for inflation to ease back closer to 2%.