'Hawkish' FOMC Minutes Shows 'Majority' Fear Higher Inflation More Than Lower Employment

Participants continued their discussion related to the ongoing review of the Federal Reserve's monetary policy strategy, tools, and communication practices (framework review). They observed that they had made important progress toward revising the Committee's Statement on Longer-Run Goals and Monetary Policy Strategy (consensus statement). Participants discussed potential revisions to the consensus statement that would incorporate lessons learned from economic developments since the 2020 framework review and would be designed to be robust across a wide range of economic conditions. Participants noted that the Committee was close to finalizing changes to the consensus statement and would do so in the near future. The manager turned first to a review of financial market developments. Over the intermeeting period, the expected path of the policy rate and longer-term Treasury yields were little changed, equity prices increased, credit spreads narrowed, and the dollar depreciated slightly. The manager noted that markets continued to be attentive to news related to trade policy, though markets' reaction to incoming information on this topic was more restrained than in April and May. Against this backdrop, the manager reported that the Open Market Desk's Survey of Market Expectations (Desk survey) indicated that the median respondent's expectations regarding both real gross domestic product (GDP) growth and inflation were roughly unchanged. *FED: MANY NOTED FULL EFFECT OF TARIFFS COULD TAKE SOME TIME *FED: SEVERAL NOTED CONCERNS ABOUT ELEVATED ASSET VALUATIONS *FED: MAJORITY SAW INFLATION RISK OUTWEIGHING EMPLOYMENT RISK Fed Minutes: Some participants said it would not be feasible or appropriate to wait for complete clarity on the tariffs' effects on inflation before adjusting monetary policy. Fed Minutes: Several participants said that the current target range for the federal funds rate may not be far above its neutral level.

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RBNZ GOVERNOR HAWKESBY: REACTION TO OUR INTEREST RATE CUTS HAS SO FAR BEEN SLOWER THAN ANTICIPATED RBNZ GOVERNOR HAWKESBY: GLOBAL UNCERTAINTIES HAD A PROLONGED IMPACT ON BUSINESS AND CONSUMER CONFIDENCE IN NEW ZEALAND RBNZ ASSISTANT GOVERNOR SILK: NOT GOOD FOR ANYBODY THAT… RBNZ: GOVERNOR HAWKESBY SAID THE CASE FOR A 50BP RATE CUT WAS BASED ON BUSINESSES AND CONSUMERS BEING OVERLY CAUTIOUS, REQUIRING A SUBSTANTIAL BOOST TO CONFIDENCE AND ACTIVITY. RBNZ's Gov. Hawkesby: We expect lenders to price in projected cuts. RBNZ GOVERNOR HAWKESBY: INCREASED TARIFFS AND TRADE BARRIERS EFFECTIVELY A NEGATIVE DEMAND SHOCK FOR THE WORLD