Source: Jin10 Data
Morgan Stanley pointed out that many clues about the future policy path of the Federal Reserve may be hidden in this meeting minutes...
The minutes of the Federal Reserve meeting are often referred to as a "meaningless event" by many because they do not include officials' views on the latest data and are released several weeks after the interest rate decision. However, Morgan Stanley pointed out that if the June meeting minutes could let the market know what made Fed officials believe that the anti-inflation process would remain unchanged, it could get more attention.
At 2am on Thursday Beijing time, the Federal Reserve will release the June meeting minutes. In a recent report, Morgan Stanley said, "If this report reveals more about what caused FOMC members to believe that progress has resumed on the anti-inflation front, and to what extent FOMC members are considering the policy trade-offs between inflation and growth, then this report could have a significant impact."
At the June meeting, the Federal Reserve kept interest rates unchanged and lowered its forecast for the number of rate cuts this year from three in March to just one, which surprised the market. In addition, while the Federal Reserve expects rate cuts to decrease this year, it also believes that inflation will remain at a high level for a longer period of time.
However, May CPI data in the United States showed that the cooling of price pressures exceeded market expectations, sparking hopes that the anti-inflation trend would return to normal after unexpectedly rising in the first quarter of the year, and prompting some Fed officials to change their forecasts.
Morgan Stanley said that a better understanding of how CPI data changed officials' discussions on inflation prospects during the Federal Reserve meeting "could better understand the Fed's reaction function," and added that clues as to whether the Fed is beginning to pay closer attention to economic growth could also help determine whether the Fed may tolerate higher inflation.
In the weeks since the June 11-12 Federal Reserve meeting, investors have digested a series of economic data: May retail sales were lower than expected, while the Fed's preferred inflation gauge—the June core PCE annual rate—fell from 2.8% to 2.6%, breaking four months of stagnation.
Although these data have helped boost the market's bet that the Federal Reserve will cut interest rates in September, Morgan Stanley believes that the Fed will not cut interest rates significantly, and added that investors hoping for a few hundred basis points of rate cuts from the Fed may be disappointed.
Editor / jayden