FOMC meeting minutes: a robust debate on inflation - Nomura

Analysts at Nomura explained that the minutes from the July FOMC meeting showed two things about the Committee’s thinking in July. 

Key Quotes:

"First, while some members were ready to announce the balance sheet adjustment at that meeting, “most preferred to defer that decision until an upcoming meeting”, i.e. September. This supports expectations of an announcement at the upcoming meeting next month on 19-20 September. Second, the minutes contained a robust debate on how to interpret the recent soft readings of inflation and the inflation outlook. 

We think this second development is of higher importance as its resolution will likely determine the future path of the policy rate. Although, the minutes stated that “Most [participants] continued to anticipate that inflation would stabilize around the Committee’s 2 percent objective over the medium term,” concerns over the near-term inflation outlook are becoming high. According to the minutes, "some" participants wanted to see inflation pick up before hiking while "some others" were worried about potential negative outcomes arising from a delay in the pace of raising rates, such as higher inflation. It looks like the Committee was relatively split over the stance toward future rate hikes. The rates-related decision depends on data developments, including inflation data and financial variables such as long-term treasury yields. We maintain our call for a December rate hike but it has become slightly more uncertain, depending on inflation developments and financial conditions."