Yahoo Finance's Brian Cheung breaks down the latest minutes from the Fed's July meeting.
DAVE BRIGGS: --news fresh out of the Fed as minutes are in from the July meeting, as we await their next gathering in Jackson Hole and, of course, the next, what we believe, is a rate increase in September. What have we learned today, though, Brian Cheung?
BRIAN CHEUNG: Yeah, well, we were looking back on the details of what unfolded at the Fed's last meeting. That was about three or four weeks ago where they raised by another 75 basis points. The question naturally, is the Fed going to move even more aggressively in the future meetings? And the next one is on dock for September.
And some big highlights, broadly, from the minutes, which again details deliberations that happened many weeks ago, all the participants agreeing with that 0.75 percentage point hike. They expect a moderate increase in unemployment to happen at some point. Obviously, the hot July jobs report didn't show that happening quite yet. But the Fed, at some point, saying they will slow the pace of rate hikes.
Now, what's gonna be the signal for that? Have to read the tea leaves. One critical sentence from the Fed minutes going, quote, "Participants generally judged that the bulk of the effects on real activity had yet to be felt because of lags associated with the transmission of monetary policy. And that the effects of policy firming on consumer prices were not yet apparent in the data translation."
Inflation remains the big story here. But they need to see how that inflation unfolds before they decide when to maybe scale back the pace of those interest rates hikes, maybe to 50 basis points. And of course, we'll have all eyes on the Federal Reserve's Jackson Hole symposium happening next week. Maybe we get some hints as to that. But of course, there's another round of job reports and also inflation reports before the Fed's next meeting in September. Anything could happen between now and then.
DAVE BRIGGS: What's your expectation? Let's skip beyond Jackson Hole. Do you still expect a 75 point hike in September?
BRIAN CHEUNG: Well, for right now, markets are basically pricing in a 50 basis point hike. Now, of course, there's still decent odds that it could be the more aggressive 75 basis point hike. And one big reason is because of the CPI print for July that showed essentially no change in prices between June and July. But of course, on a year-over-year basis, still clocked in at 8.5% higher than it was a year ago.
So the Fed's job far from done. And the Fed minutes underscore that there will be more rate hikes. We've seen markets broadly bounce back over the last, let's call it, two months or so. They clearly have an expectation for the Fed's gonna stop the rate hikes.
Could there be more surprises if the Fed goes more large than expected? That's something we might not really get any sort of clarity on until that September meeting.