Tonight at 2:00, the Federal Reserve’s July FOMC meeting minutes will be released. This is the most critical risk event for the markets this week.
At the July FOMC meeting, the Fed kept the interest rate unchanged at 3.50% to 3.75% by a vote of 9 to 3, marking the fifth consecutive hold. Three regional Fed presidents voted against the decision, arguing for a 25-basis-point rate hike— the first time since September 2016 that three votes against were cast simultaneously. After the meeting, Fed Chair Waller clearly rejected describing this decision as a “pause,” saying, “This is just the beginning of the story.” He also emphasized that the Fed does not have a flexible inflation target—2% is the only target.
Since then, economic data has weakened across the board. July nonfarm payrolls rose by only 57,000. CPI year-on-year fell to 3.4%, and market pricing for a September rate hike has dropped sharply from 65% to 80% right after the meeting to roughly 30% to 40% now. In a Reuters survey, about 90% of economists expect rates to remain unchanged in September.
Tonight’s key is to see how large the hawkish faction revealed in the minutes is.
If the minutes show that most participants agree inflation is cooling and do not feel it’s time to hike, the probability of a September hike will likely be pushed down further, and BTC could hold above 65,000 and challenge higher levels.
If the minutes show deeper concern within the Fed about inflation persistence and more people moving closer to supporting a rate hike, then combined with the reality that the yield on the 30-year U.S. Treasuries has surged to the highest level since 2007, and that Brent crude has returned to $94 because the Iran–Israel ceasefire deal has expired without reaching an agreement, the 35% probability of a rate hike could rise again, and BTC may retest 62,000, or even 60,000.
In short, after Waller takes office and sharply compresses forward guidance, the market will parse the minutes word by word for any clues about internal disagreements and the rate-hike threshold.
For now, BTC is consolidating around $64,500, waiting for this news. After the minutes are released, volatility will surge sharply.
The direction will depend on how the minutes describe inflation risks and the interest-rate path—not simply whether the Fed hikes or doesn’t hike.
At the July FOMC meeting, the Fed kept the interest rate unchanged at 3.50% to 3.75% by a vote of 9 to 3, marking the fifth consecutive hold. Three regional Fed presidents voted against the decision, arguing for a 25-basis-point rate hike— the first time since September 2016 that three votes against were cast simultaneously. After the meeting, Fed Chair Waller clearly rejected describing this decision as a “pause,” saying, “This is just the beginning of the story.” He also emphasized that the Fed does not have a flexible inflation target—2% is the only target.
Since then, economic data has weakened across the board. July nonfarm payrolls rose by only 57,000. CPI year-on-year fell to 3.4%, and market pricing for a September rate hike has dropped sharply from 65% to 80% right after the meeting to roughly 30% to 40% now. In a Reuters survey, about 90% of economists expect rates to remain unchanged in September.
Tonight’s key is to see how large the hawkish faction revealed in the minutes is.
If the minutes show that most participants agree inflation is cooling and do not feel it’s time to hike, the probability of a September hike will likely be pushed down further, and BTC could hold above 65,000 and challenge higher levels.
If the minutes show deeper concern within the Fed about inflation persistence and more people moving closer to supporting a rate hike, then combined with the reality that the yield on the 30-year U.S. Treasuries has surged to the highest level since 2007, and that Brent crude has returned to $94 because the Iran–Israel ceasefire deal has expired without reaching an agreement, the 35% probability of a rate hike could rise again, and BTC may retest 62,000, or even 60,000.
In short, after Waller takes office and sharply compresses forward guidance, the market will parse the minutes word by word for any clues about internal disagreements and the rate-hike threshold.
For now, BTC is consolidating around $64,500, waiting for this news. After the minutes are released, volatility will surge sharply.
The direction will depend on how the minutes describe inflation risks and the interest-rate path—not simply whether the Fed hikes or doesn’t hike.