Investors, analysts, and economists are eagerly waiting for the release of FOMC meeting minutes today for more information on the central bank’s rate-hike course. The minutes of the US Federal Open Market Committee (FOMC) meeting are closely observed by global investors. FOMC meeting minutes reveal Fed members’ perspectives on terminal rate and potential Federal Funds Rate direction. The minutes of the FOMC meeting held on June 13-14 will be released today, Wednesday, July 5, at 2 pm. i.e. 11.30 pm IST – Indian Standard Time.

During its meeting in June 2023, the Federal Reserve kept the Fed funds rate target unchanged at 5%-5.25%. It was the first pause in the tightening effort after 10 straight increases that raised borrowing costs by 500 bps to their highest level since September 2007.

The US Fed delivered on what the market expected but with a twist. The Federal Reserve maintained the present level of US interest rates but signalled that further hikes are expected given the economy’s hawkish outlook. Although the FOMC has ceased raising the federal funds rate, median projections from its members point to a final rate of 5.6%, after at least two more expected rate hikes.

Going forward, markets predict another rate hike in July. This anticipation stems largely from Powell’s previous speeches, in which he stated that the Fed would wait to see how previous rate hikes affected the economy.

Fed Chief Powell has already indicated that rates will remain higher for a longer period than expected earlier. Last month, the Federal Reserve Chair Jerome Powell’s testimony to Congress also sent the cues for a more hawkish tone as core inflation still remains largely untamed.

The Federal Reserve has paused its series of interest-rate hikes, but borrowing prices are expected to rise faster than originally anticipated, owing to what Chair Jerome Powell has described as “surprisingly persistent inflation and labor-market strength.”

The employment market is robust, and the retail US sales numbers also demonstrate the economy’s resilience, which may be the cause of the cooling influence on inflation. Each of these has the potential to raise inflation once more and make the Fed’s task more difficult.

The minutes of the June FOMC meeting will show whether or not the market-expected terminal federal funds rate will be maintained.

Markets, meanwhile, having run up a lot in the first six months will await further cues from the economy, central bank, and corporate results to decide on the next leg of the bull run. Any negative surprise may spook the markets while any positive data could extend the rally into the second half of the year.