Minutes of the July 30-31 Federal Open Market Committee meeting indicated that a “substantial majority” of members believed it was “likely appropriate to ease policy at the next meeting.”
Although policymakers agreed to keep interest rates unchanged at the time, the minutes also revealed that some officials were leaning toward starting to cut rates in July rather than waiting until September.
“All participants supported maintaining the target range for the federal funds rate at 5.25% to 5.5%, although several noted that recent progress in inflation and increases in the unemployment rate provided a reasonable case for reducing the target range by 25 basis points at this meeting or that they could have supported such a decision.”
Link to FOMC Meeting Minutes (July 30-31)
Furthermore, Committee members noted that recent data had increased their confidence that inflation was moving sustainably toward the 2% target, but cautioned that “Further gradual easing of labour market conditions could lead to a more serious deterioration.”
Market Reactions
US Dollar vs Major Currencies: 5 minutes
Comparison between the US dollar and major currencies Chart by TradingView
The US dollar, which had already been falling a few hours before the FOMC minutes thanks to the annual nonfarm payrolls revisions, fell sharply across the board after seeing further confirmation of a possible interest rate cut in September.
The USD/JPY pair posted its biggest drop yet, as bearish momentum was already in place since the pair retreated from the 146.00 level in the previous trading session. However, the dollar rose after its decline after the FOMC minutes, as traders were likely to take profits as the report was mostly in line with expectations.