The meeting minutes from the Fed decision succeeded in keeping markets calm. Perhaps too calm. There was no real clear signal from the minutes. The beginning of the balance sheet reduction may come in September or perhaps in December. The same goes for the rate hike, although December is more likely.
All in all, the minutes left all the options open and volatility remained comatose. What the Fed told us this time and basically for the past few years is that they are data-dependent. While the recent shrugging off of inflation shows that sometimes they ignore the data, we can still expect a reaction to the upcoming events.
The Non-Farm Payrolls report for June is coming up on Friday, July 7th. Once again, the focus is on wages. If we get another read of around 2.5%, it is hard to see any momentum towards a rate hike.
US salaries are far from overheating. Without rising pay, core inflation will likely remain low and the Fed will lose its justification to run ahead of the curve and to battle Ghost inflation.
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