While Powell has said now is not the time for “nuanced readings” on inflation, any discussion of the underlying dynamics of prices could be important, given the growing divergence between the Fed’s preferred measure of inflation, based on personal consumption, and the consumer price index, said Luke Tilley, Wilmington Trust’s chief economist.
The minutes could also provide insights into how the FOMC would view a decline in economic activity. A number of Wall Street economists have lowered their forecasts for second-quarter growth, and the Atlanta Fed’s popular tracking estimate currently shows a contraction for the quarter, even as the labor market has stayed strong.
Slowing Growth
While Powell has declared that the battle against high inflation is “unconditional,” the committee could have a range of views on whether it would be necessary to adjust plans in light of any softer data.
“The most important thing will be any discussion around what might cause the Fed to deviate from the projected path,” said Stephen Stanley, economist at Amherst Pierpont Securities. “Powell has very much emphasized the inflation-fighting part of the job. The growth versus inflation aspects of monetary policy come into tension if the economy does slow down.”
The odds of a US recession in the next year are 38% in the next 12 months, according to the latest forecast of Bloomberg Economics, after consumer sentiment hit a record low and interest rates surged.
While FOMC participants are not identified by name, the minutes could also give insight into whether others on the committee shared the concerns of Kansas City Fed chief Esther George, whose dissent from the 75 basis-point hike surprised Wall Street. George in previous years has been a hawk and only dissented in favor of tighter policy.
In a statement on June 17, George said the size of the move, combined with the shrinking of the central bank’s balance sheet, created uncertainty about the outlook.
This article was provided by Bloomberg News.