FOMC Minutes: Will There Be More Rate Hikes in 2023? Gold And Stock Prices Fall As FED Remains Hawkish

The US Federal Reserve unanimously voted to keep interest rates steady, according to the FOMC minutes that were made available to the public on Wednesday, July 5.

The vast majority of respondents to the Open Market Desk’s polls of primary dealers and market participants projected no change in interest rates at this meeting, according to the FOMC meeting minutes from June.

Although the median route of the poll showed no rate increases through the beginning of 2024, there was a significant range of responses. They believed there was a good chance that subsequent discussions would result in even further tightening.

Even though the majority of members believe that additional rate hikes are imminent, policymakers decided due to worries about economic growth. After implementing 10 consecutive rate rises, they saw an opportunity to skip the June meeting, citing the lag effect of policy and other worries.

Two More Hikes Before Year End?

The decision-makers reasoned that “leaving the target range unchanged at this meeting would allow them more time to assess the economy’s progress toward the Committee’s goals of maximum employment and price stability.”

Members of the Federal Open Market Committee expressed hesitation due to a variety of circumstances. A brief halt, they claimed, would give the committee time to evaluate the effects of the hikes, which totaled 5% points and were the most drastic since the early 1980s.

Members of the FOMC also predicted that before the end of the year, two more hikes to its benchmark lending rate would likely be required to reduce inflation.

According to the Fed’s revised Summary of Economic Projections, the current median prediction by FOMC members, showed policymakers believe the federal funds rate will reach 5.6% by the end of the year, up from the 5.1% anticipated in March. This suggests that during its final four scheduled meetings this year, the Fed may execute two additional quarter-point increases. According to the CME FedWatch Tool, the probability of a quarter-point rate increase in July is currently 88.7%, around 21 days before the following meeting.

There are still concerns, even if the U.S. economy has so far managed to withstand tighter monetary policy quite well. Although inflation is the main issue, several members are worried about the state of the banking industry in light of the three failures earlier this year. They stated that the sector’s downturn might cause loan conditions to become even more stringent. 

More Challenges For The Fed?

The American banking system is strong and dependable. Household and business credit restrictions are anticipated to have an impact on hiring, inflation, and economic growth. The scope of these consequences is still unknown. The Committee is nevertheless quite concerned about the risks of inflation.

Over the long run, the Committee aims to attain maximum employment and inflation at a rate of 2%. The Committee decided to keep the target range for the federal funds rate at 5 to 5-¼% to further these objectives. The target range maintained at this meeting enables the Committee to evaluate new data and its effects on monetary policy.

The After-Affects Of The FOMC Minutes Release

Gold prices were under pressure as a result of a combination of higher U.S. Treasury yields, a stronger currency, and the hawkish tone expressed in the minutes released yesterday. The most active August gold futures contract posted a loss of $6.80 as of the most recent trading session, finishing at $1922.70. 

Not just this, but as investors analyzed the minutes from the most recent meeting of the Fed and prepared for crucial economic data in the coming days, Wall Street’s major indexes concluded the day with small falls on Wednesday.

The release of job openings data on Thursday and the publication of the official June jobs report are two significant U.S. data points this week, and a lot depends on that.