The minutes of the Federal Reserve meeting are about to be released, and analysts are discussing whether Warsh will reduce the content of the minutes
Key minutes to be released by the Federal Reserve on Wednesday from Kevin Warsh's first Fed policy meeting as chairman may provide more insight into what the new central banker calls "internal wrangling" after officials decided to keep interest rates on hold during a two-day meeting last month and underscored their commitment to reining in inflation. One of the biggest uncertainties surrounding the release of the minutes from the June 16-17 Federal Open Market Committee (FOMC) meeting is whether Warsh will make drastic changes to the minutes as he did with the committee's post-meeting policy statement, which removed all forward guidance and scaled back its description of current economic conditions. The situation in the Middle East underscores Wash's reluctance to say much about the future. Oil prices, which had continued to fall previously, had strengthened the argument that inflation would fall, but began to recover after the United States and Iran exchanged attacks and President Donald Trump announced that the framework of the peace agreement had been scrapped. The nearly 8% rise in benchmark oil prices is still modest compared with the gains in the early days of the conflict on February 28. Brent crude oil was trading at $77 a barrel on Wednesday, after reaching a high of about $120 in May and averaging about $105 in the more than two months to the end of May. But it reminded the market that volatile geopolitical situations still shroud the Federal Reserve's discussions on inflation trends and appropriate monetary policy responses. After the latest round of military strikes, investors expect the probability of the Fed raising interest rates at its upcoming meeting on July 28-29 to rise to about one-third, and to about 70% at the September 15-16 meeting, according to Chicago Mercantile Exchange Group's (CME Group) Fed Watch tool. U.S. Treasury yields soared in response. The minutes of the meeting are scheduled to be released at 2 p.m. Eastern Time (02:00 Beijing time). At the June meeting, Fed policymakers unanimously agreed to keep the benchmark interest rate unchanged in a range of 3.50% to 3.75%. At the same time, the latest forecasts submitted by all members except Warsh show that the committee has abandoned its previous expectations for an interest rate cut this year, and internal opinions are currently divided: some people believe that keeping interest rates unchanged this year is the best option, while others believe that in view of continued high inflation, it is necessary to raise interest rates at least once. Inflation, as measured by the Fed's preferred inflation index, is now about twice the Fed's 2% target, while the labor market appears to be stabilizing after being soft for much of last year. Warsh was appointed by Trump, who wanted rate cuts and had blasted former Chairman Jerome Powell for failing to do so quickly enough. But in his first press conference, Warsh took a hawkish stance - repeatedly emphasizing the Fed's inflation control mission but making little mention of the goal of achieving full employment. The new chairman promised major changes to the Fed and announced after the meeting the creation of five task forces to review how the central bank operates, covering everything from its communications strategy to the data it uses to assess the economy. As policy statements are tweaked, meeting minutes are likely to play a bigger role in helping investors and analysts understand the Fed's thinking — unless the Federal Open Market Committee (FOMC) under Warsh scales back the details of the arguments and economic data presented at the meeting. By describing the different views expressed at the meeting and the approximate number of Fed officials who agreed or disagreed, the minutes can make different future interest rate decisions appear more or less likely and even begin to lay the groundwork for an eventual shift in monetary policy. That's almost as close to the kind of forward guidance that Warsh wants to avoid, a fact that has some analysts expecting the minutes to be shorter and potentially more concise in the information they provide. "Wash has explicitly avoided policy guidance in statements and press conferences, so it is unlikely that he will allow such guidance to be provided via meeting minutes," said Steve Englander, head of North American macro strategy at Standard Chartered Bank. "He used 'family quarrels' to describe heated policy discussions, a metaphor that may also carry the often veiled undertones of 'family quarrels'." Open a futures account on Sina's cooperative platform, safe, fast and guaranteed