PRIMER: FOMC Minutes due Wednesday 20th August at 19:00 BST/14:00 EDT

At the July confab, the Fed held rates at 4.25-4.50% as expected, with Governors Waller and Bowman both voting for a 25bps rate cut, in line with their comments ahead of the blackout period. Fed's Kugler did not vote. Given the market’s dovish shift in implied pricing of Fed rate cuts ahead following the soft July jobs report (traders now fully discount two 25bps reductions in 2025, with some probability of a third), traders will be particularly attentive to any arguments for rate reductions; additionally, while US CPI was in line with expectations in the month, PPI surged, leaning back against dovish calls. Note, the Minutes will not incorporate the data seen since the last meeting. The Fed’s July statement noted elevated uncertainty around the economic outlook, removing June’s line that it "has diminished". On the economy, it said recent indicators suggest activity moderated in H1, a change from June’s description of solid growth. Other language was unchanged: unemployment remains low, labour market conditions are solid, and inflation is somewhat elevated. There was no indication of imminent cuts, reaffirming its data-dependent stance. The Fed reiterated it will assess incoming data, the evolving outlook, and the balance of risks when considering future adjustments. 

At his post-meeting press conference, Fed Chair Powell leaned hawkish and pushed back on expectations for a September rate cut, stressing that significant data is due before the meeting, and no decision has been made. On tariffs, he said it is reasonable to expect a one-off price rise, but emphasised that the Fed would act to prevent “serious inflation”. Powell reiterated that policy remains modestly restrictive. On what would prompt a cut, he noted risks on both sides of the mandate, suggesting a more neutral stance would be appropriate if risks were balanced. He said inflation remains above target, while the labour market is at or near maximum employment. Upside risks remain for inflation, while employment faces downside risks, though inflation is further from target than jobs. On the consumer, he noted spending has been very strong in recent years but may now be slowing to a healthy level. On the dissents from Waller and Bowman, Powell said such differences were unsurprising and described this as one of the Fed’s better meetings.

20 Aug 2025 - 18:35- Fixed IncomeData- Source: Newsquawk