Fed July Meeting Funds Rate may stay at 1.00-1.25% Fed Communications on Policy Normalization to be Watched (Business Brief No.3692)

KResearch expects that the Federal Reserve may resolve to keep the Fed Funds Rate steady at their upcoming July 25-26 meeting, amid softening inflation. Another rate hike seems unlikely within the short term, pending further developments in inflation, since the Fed will need to closely observe whether trends are consistent with the Fed's view that the currently subsiding US inflation is transitory. What should be watched would be the Fed communiqué after the meeting and its alignment with the Fed Chair's remarks delivered to the US Senate Committee on Banking, Housing, and Urban Affairs on July 13. In her address, she specified her justifications for gradual rate hikes, indicating that current interest rates are slightly lower than ideal. Apart from that, the divergence in views between the Fed and some financial markets could cause some volatility in capital markets.

New KR Logo_แนวนอนIt may be possible that the Fed will provide greater detail toward pending balance sheet downsizing from the plan initially called for at their June meeting, which mentioned about ceilings on the securities they hold, i.e., government bonds, public organization debt instruments and mortgage-backed securities (MBS). More clarification is expected to help ensure that any market fears are prudently allayed, especially on balance sheet reductions, to forestall any untoward economic ramifications ahead.