The Federal Reserve on Wednesday released the minutes from its July 27-28 meeting.
Federal Open Market Committee officials voted then to keep short-term interest rates anchored near zero while also expressing optimism about the pace of economic growth.
In the post-meeting statement, the committee said the economy had made “progress” toward the dual goals of sustainable inflation around 2% and full and inclusive employment. The statement also noted that the “substantial further progress” benchmark had not been met, but markets took the statement to mean that the FOMC might start rolling back some of its policy accommodation soon.
Since then, investors have been parsing Fed officials’ public statements for clues on when the first step in the tightening process — the reduction, or tapering, of asset purchases — will begin. The minutes were expected to provide more depth on the thinking from individual FOMC members.
The market now largely expects the committee or Chairman Jerome Powell to make an announcement about tapering in the next month or two, with the process likely to begin before the end of the year.
Other areas of focus in the minutes will be the Fed’s view on the economy, specifically on the rising inflation pressures over the past several months. Most Fed officials see the highest inflation in decades to be transitory and likely to dissipate once supply chain issues are resolved and demand returns to pre-pandemic levels.
While the market is expecting tapering soon, it still doesn’t see interest rate hikes coming at least for another year or so. Futures contracts tied to the fed’s benchmark interest rate are pricing in about a 50% chance of a rate hike in November 2022 and a 69% chance of an increase the next month.
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