The minutes of the US Federal Reserve’s June monetary policy meeting will be published on Wednesday. Investors are eager to analyze the Fed’s hawkish hold and policymakers’ view on inflation to determine the timing of the potential interest rate cut later this year. Fed Chair Jerome Powell’s admission of disinflation progress has led to speculation of a rate cut in September. The Fed has held its monetary policy settings for the seventh consecutive meeting, maintaining a cautious outlook on inflation risks.
The Summary of Economic Projections (SEP) showed a higher inflation forecast for 2024 and less easing this year, with the median FOMC member calling for one rate cut by the end of the year and four cuts in 2025. Powell emphasized the need for more confidence in the inflation outlook before initiating rate cuts. Recent data on inflation has been mixed, with core Consumer Price Index (CPI) rising 3.4% from a year ago and core Personal Consumption Expenditures (PCE) Price Index increasing by 2.6% in May.
Fed Chair Jerome Powell’s remarks at the European Central Bank (ECB) Forum hinted at a possible rate cut as he acknowledged progress in disinflation. The markets now see a 67% chance of the Fed lowering rates in September. The upcoming release of the FOMC minutes will provide more insight into the Fed’s cautious stance at the June meeting, potentially affecting the US Dollar. If policymakers express optimism on inflation progress, risk flows could weigh negatively on the USD.
In terms of technical analysis, the US Dollar Index is in a consolidative phase after retreating from two-month highs. There is a bullish potential for the USD, with key levels to watch including 106.00 and 105.37 on the upside, and 105.17 and 104.76 on the downside. The FOMC minutes are a crucial economic indicator that guides future US interest rate policy. Markets closely monitor these minutes to gauge the Fed’s stance on monetary policy and its impact on the US Dollar. The release on Wednesday will provide valuable insights for investors and traders.
