10 Year T Bill was up .53, initial claims were down, and Fed minutes show no signs of deviating from higher for longer. Here is the summary of the FOMC minutes I prepared for my finance team. Kind of all came to a head today.
The Fed decided to keep the federal funds rate unchanged in the target range of 5.25-5.5%. Inflation had eased over the past year but remained elevated, with a lack of further progress in recent months toward the 2% goal. Economic activity continued to expand at a solid pace, with strong job gains and low unemployment. The Fed judged the risks to achieving its employment and inflation goals had moved toward better balance over the past year, but the outlook remained uncertain with inflation risks still elevated. The Fed decided to begin slowing the pace of reducing its securities holdings in June, lowering the monthly Treasury redemption cap from $60B to $25B and reinvesting excess agency MBS payments into Treasuries. Most participants saw the need to keep policy restrictive until there was greater confidence inflation was moving sustainably back to 2%, though some were open to further tightening if inflation risks materialized. There was uncertainty about the degree of restrictiveness of current policy given potential changes in the neutral rate and output potential.
The overall sentiment among Fed officials seemed to be one of cautious patience. While noting some progress on inflation, they remained highly attentive to upside risks and lacked confidence yet that inflation was on a sustained path back to 2%. Hence, most felt it appropriate to maintain a restrictive policy stance until clearer evidence of returning to the inflation target emerged.
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