Jumping straight to Citi's 'bottom line' on the FOMC July meeting Minutes:
- A heavily divided minutes proves to be a disappointment to investors looking for a clear signal on September (we hadn't expected one)
- We continue to expect a September lift-off remains a possibility
- Today's minutes suggests the FOMC is becoming more divided
- Multiple comments on the USD (both the divergence trade, and on inflation) leave long USD positions at risk short-term
More:
- Huge split in how FOMC participants weight inflation and unemployment
- These differences are getting bigger.
- Consensus that employment slack is being cut is less important.
- The question is whether this reflects a Fed that says they have another month to decide or are too divided to hike without multiple dissents. There is a risk that whatever is decided in September will generate multiple dissents - from either hawks or doves
- As compared to the Statement which seemed to make 'some further' labor market improvement the trigger for lift-off, there seemed to be more concern about downside inflation risk and the USD.
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Maybe Citi's bottom line should be 'As clear as mud'. The Federal Reserve likes to think it is getting better at being transparent. And maybe it is. But, is it helping?
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Anyways ... other bank views here:
- September US rate hike? Fuggedaboudit says BNP
- CIBC still call for September
