FOMC minutes & Powell Testimony confirm Fed rate cut in July

After two crucial events on Wednesday this week - (a) FOMC minutes for the policy meeting conducted on June 18-19 and (b) Fed Chair Powell testimony at the House of representatives, the US policy is set to turn accommodating and a minimum of 25bps rate cut is done deal from the Fed meeting due in July end.

The FOMC minutes confirmed the rationale behind the change in ‘dot plot’ and new guidance that was provided in the post policy statement. Besides, the Fed Chair’s testimony indicated that the Fed would look through the recent upside surprise in the payroll reading for June-2019 and move to accommodate the economy. His message in the testimony was similar to what was indicated in the minutes.

Key takeaways from FOMC minutes

  1. The FOMC minutes showed that substantial emphasis was provided to the headwinds from ‘global developments’, ‘trade policy’ and ‘faltering business sentiment’. Hence, ‘uncertainties and downside risk surrounding the economic outlook’ were deemed ‘to have increased considerably’. 
  2. Majority of the FOMC members felt that the outlook for domestic consumption remains strong. However, concerns were expressed about the impact that tariffs could have on spending with ‘several participants noted that tariffs could eventually become a drag on consumer durables spending’.  
  3. Majority of participants felt that financial conditions remained supportive of growth but that improvement was ‘premised on expectations that the Fed would ease policy in the near-term to help offset the drag on economic growth’. Hence, it could emerge as an important consideration for the Federal Reserve in setting monetary policy. 
  4. The minutes showed that ‘many participants indicated that the case for somewhat more accommodative policy had strengthened’ and that ‘many judged additional monetary policy accommodation would be warranted in the near term.

We continue to emphasize that the majority of US economic indicators, with the exception of the payroll release, has continued to indicate that the momentum is slowing and a rate cut in July can be followed by another one in Sept or Dec 2019 Fed meeting. 

Author Image


Recent Post

  • PC Jeweller Demerges its Expo..

    What’s the deal? PC Jewelers recently announced that it would demerge its Export Division and merge with its wholly owned subsidiary - PCJ Gems & Jewellery Limited. Company c..

  • Insurance- Introduction

    Risk and uncertainty are associated with life in some of the other ways. These risks and uncertainties are increasing daily because of the increment in the speed of life. For example, i..

  • Rail Vikas Nigam Ltd. IPO

      Offer Details Price band Rs 17-19 Per Equity Share Offer Open Date Mar 29, 2019 Offer Close Date Apr 03, 2019 Lot Size..

  • Tech Mahindra Buyback

    The Board of Directors of Tech Mahindra Ltd. approved a share buyback for its investors on Feb 21, 2019. The details of the buyback include: Ex-Date: March 5th, 2019 Record Date: Marc..

  • BHEL Buyback

    The Board of Directors of BHEL approved a share buyback for its investors on Oct 25, 2018. The details of the buyback include:  Record Date: November 6th, 2018 Buyback price: Rs...