Minutes confirm Mid-Cycle Adjustment Stance by most

The Minutes to last month’s Fed rate cut showed that a number of officials stressed the need for Fed flexibility, which should support the argument for the Fed to deliver another rate cut in September.  With most officials viewing the July cut as a mid-cycle adjustment, it will take further deterioration with the global outlook for them to commit to an easing cycle.  Inflation has seen recent upticks, but the overall longer-term trend has been downward and the risks of becoming Japan should keep the Fed committed to delivering further rate cuts.

The Fed will keep optionality on the table and we should see Fed Chair Powell’s keynote speech at Jackson Hole on Friday solidify a September rate cut and deliver weak commitment for more to come.

The bullish case for stocks remains intact and we could see many focusing on the fact that a couple of FOMC participants supported half-point cut.  The Minutes were a non-event and we should see sideways price action until Powell’s Jackson Hole keynote speech on Friday.  The Fed could very well correct their communication mistake at Jackson Hole, which would be welcomed holders of risky assets.  The markets are still pricing in four rate cuts over the next 12 months.

US stocks held onto their gains while the dollar remains mixed against its major trading partners.

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya