The FOMC Minutes in July

The Federal Open Market Committee released the minutes from their July meeting. While there was nothing too surprising there were some important takeaways…(FOMC)

• HOUSING: The committee did note that rising rates are having a noticeable impact on housing and will impact other industries as well. “Participants also observed that housing activity had weakened notably, reflecting the impact of higher mortgage interest rates and house prices on home affordability. Participants anticipated that this slowdown in housing activity would continue and also expected higher borrowing costs to lead to a slowing in other interest-sensitive household expenditures, such as purchases of durable goods.”

• ECONOMY: The big debate on whether or not the economy is a recession seems to miss the point. Are we growing or slowing is all that matters and the FOMC has noticed we are slowing in everything except the labor market. “With regard to current economic activity, participants noted that consumer expenditures, housing activity, business investment, and manufacturing production had all decelerated from the robust rates of growth seen in 2021. The labor market, however, remained strong. Participants observed that indicators of spending and production suggested that the second quarter of this year had seen a broad-based softening in economic activity.”

• RATE HIKES: The committee was pretty blunt with their analysis on a neutral fed funds rate and the impact of the 75 bip hike in getting us to that point. “Even so, with inflation elevated and expected to remain so over the near term, some participants emphasized that the real federal funds rate would likely still be below shorter-run neutral levels after this meeting’s policy rate hike.”