Highlights for the FOMC statement on July 26, 2017
- In June, the Fed hiked to 1.00%-1.25%
- Fed to start balance sheet unwind 'relatively soon'
- Repeats that inflation seen rising to 2%
- Says will reinvest holdings 'for the time being'
- Repeats that overall inflation measures ex food and energy have declined
- No dissents
- Says job gains 'have been solid'
- Household spending and business investment have continued to expand
- Repeats that near-term risks to the economy appear 'roughly balanced' but it is monitoring inflation developments closely
One change is that 'job gains have been solid' compared to 'job gains have moderated' in June.
This line also changed from:
On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent.
To:
On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined and are running below 2 percent.
What does removing 'somewhat' mean? To me it means the Fed sees inflation just a little bit below target rather than moderately below target. The market is seeing it the other way.
The US dollar is 40-60 pips lower across the board. I think (like me) there was a chance of something genuinely USD-positive and traders were positioned that way. When it didn't come they bailed.
Another take is that tightening the balance sheet 'relatively soon' isn't 'soon' so that means they may wait beyond September. That's splitting hairs but it's something. Treasury yields are also headed lower as the crowded short trade gets squeezed.
