In the FOMC’s meeting minutes from July, Fed officials noted that (1) June CPI was softer than anticipated, (2) the labor market remained very tight but that the imbalance between supply and demand was diminishing, (3) PCE remained elevated but that inflation declined in June, (4) GDP appeared to have decelerated in the second quarter, (5) recent PMI data showed a slowing pace in foreign growth in the second quarter, including fading China activity, anemic growth in Europe, weakening activity in Canada and Mexico, and the tech-sector slump weighing on Asian economies.
But despite these positive inflation results Fed officials concluded “notwithstanding recent favorable developments, inflation remained well above the Committee’s 2 percent longer-term objective and that elevated inflation was continuing to harm businesses and households—low-income families in particular.”
Traders read this as a signal of more rate hikes to come and have begun to adjust positions accordingly. U.S. Treasury prices are higher in the short tenors but lower in the 6–30-year tenors, and the 30-year reaching its highest level in 12 years at 4.409%. The U.S. Dollar Index is -0.26% with the USD declining against all G10 and most major currencies. And the probability of a November 25-basis point hike increased to 30.5%, continuing its gradual move higher.
U.S. Weekly Jobless Claims were 239k, in-line with the 240k estimate.
Oil prices are +1.46% today (and positive again for the year +0.35%). Gold prices are +0.48% and silver +2.19%.