The Fed minutes showed that policymakers were divided and that the hawks will still want to deliver more tightening.  Fed Officials are concerned a tight labor market will make inflation tight throughout the rest of the year.  If inflation remains persistent, that could be a gamechanger for inflation expectations.  Wall Street was getting comfortable with higher for a little bit longer, but they are not ready to price in more than a half-point in rate hikes.  In order to conquer inflation the Fed seems set on forecasting a mild recession, which is very much different than Powell’s slower growth call.

In the end, the fate of these Fed policy decisions will depend on the data and right now both the labor market and inflation readings are expected to soften over the next week.  Friday’s NFP report is expected to show job growth cooled from 339,000 to 225,000, while the unemployment rate ticks lower to 3.6%.  The June inflation report is going to show the base effects help the disinflation process as the headline year over year reading falls from 4.0% to 3.0%.  Some analysts are making the case for a 2.8% reading, which seems relatively close to the Fed’s target.  The problem for the Fed is that inflation will likely rise over the coming months.

The dollar will play tug-of-war with the majors as the risk of more Fed tightening is debated, while the Europeans struggle to bring inflation down.

Fed’s Williams spoke after the close and his comments support the case for more rate hikes.  Williams noted that the data supports more action and that the Fed’s work is not done.

Fed rate hike expectations have edged a little higher for the July 26th meeting, but the peak rate remains steady. The yield on the 10-year Treasury yield rose 7.7 bps to 3.932%.

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at [email protected]. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Ed Moya

Senior Market Analyst, The Americas at OANDA

With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.

• SEO Powered Content & PR Distribution. Get Amplified Today.
• PlatoData.Network Vertical Generative Ai. Empower Yourself. Access Here.
• PlatoAiStream. Web3 Intelligence. Knowledge Amplified. Access Here.
• PlatoESG. Automotive / EVs, Carbon, CleanTech, Energy, Environment, Solar, Waste Management. Access Here.
• BlockOffsets. Modernizing Environmental Offset Ownership. Access Here.
• Source: https://www.marketpulse.com/newsfeed/fed-minutes-send-bond-yields-higher/emoya