Bankinter| On Wednesday, the Minutes of the last Fed meeting (25/26 July) were published. On that occasion the Fed raised rates +25 b.p. to 5.25%/5.50% and insisted on following a data-dependent approach in future meetings. In the minutes most participants insist on the need to continue to fight inflation, which remains high (+3.2% in July for headline and +4.7% for core). On the other hand, some members warned of the negative impact on the economy of rate hikes and a couple of them advocated not raising rates in July.
Assessment: The Minutes maintain the data-dependent approach that Powell alluded to on several occasions at the July meeting and show discrepancies among its members. However, most participants express their concern about inflation and believe that monetary policy will continue to need to be tightened. This is especially so in a context where the labour market remains strong. These comments raised fears of a further rate hike in September and weighed on the T-Note’s IRR, which now stands at 4.31% vs. 4.20% before the release of the document. However, differences among members seem to us to be relevant. Some members are clearly concerned about the effect of rate hikes on the economy and believe that the Committee should consider both the risk of not taking enough action and the risk of overreaching.