U.S. FOMC Meeting Minutes (July 30-31, 2024)

Fed minutes point to likely rate cut in September

• The minutes from the July 30-31, 2024 Federal Open Market Committee (FOMC) meeting acknowledged the recent progress made on inflation and easing in labour market conditions. 
• On the recent inflation readings, Committee members indicated that "recent data had increased their confidence that inflation was moving sustainably toward 2 percent." Participants also noted that the "moderation of growth in labor costs as labor market conditions rebalanced would continue to contribute to disinflation" and the labor market now appeared to be in better balance. 
• When discussing the appropriate policy actions, though all participants supported maintaining the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, "several observed that recent progress on inflation and increases in the unemployment rate provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision".  
• On future policy decisions, "the vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting."  

Key Implications

• Today's minutes will serve to solidify expectations that the Federal Reserve will begin lowering its policy rate in September. The softening in labor market conditions since the prior meeting and continued disinflation has shifted the balance of risks to the point that some members could have supported a rate cut at this meeting. 
• The risks remain two-sided, however, as Governor Bowman noted in her speech yesterday that inflation is still uncomfortably above the Committee's 2 percent goal. The pace of cuts beyond the September FOMC will depend on inflation continuing to move sustainably towards 2 percent. We expect that given the further softening in labour market conditions since this meeting, the FOMC will have the confidence to lower its policy rate by 25 basis points in September and again in November and December.    

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