The Federal Reserve Board and the Federal Open Market Committee on Wednesday released the minutes of the Committee meeting held on July 26–27, 2022. The minutes of the FOMC meeting were released on August 17, 2022. On July 27, Fed hiked the rate by 75 basis points taking the total increase in rates to 225 basis points in 2022. The minutes for each regularly scheduled meeting of the Committee ordinarily are made available three weeks after the day of the policy decision and subsequently are published in the Board’s Annual Report.
Here are some excerpts from the minutes of the FOMC meeting held on July 26–27, 2022.
A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve System was held in the offices of the Board of Governors on Tuesday, July 26, 2022, and continued on Wednesday, July 27, 2022.
Financial markets over the intermeeting period reflected elevated uncertainty about the outlook. Most market participants appeared to view a moderation of inflation and slower, but still positive, economic growth ahead as the most likely scenario.
Respondents to the Open Market Desk’s surveys of primary dealers and market participants marked down their growth forecasts for 2022 and 2023 and attached higher odds than in the June survey to the possibility that the U.S. economy could enter a recession in coming quarters.
Market participants perceived falling commodity prices—particularly for oil—and the FOMC’s commitment to bringing inflation down as pointing to lower inflation ahead.
Nearly all respondents to the Desk survey anticipated a 75 basis point increase in the target range at the current meeting and most expected a 50 basis point increase in September to follow. The market-implied path of the federal funds rate indicated a peak policy rate of around 3.4 percent, significantly lower than at the time of the June meeting.
Broad equity price indexes were higher over the intermeeting period, amid heightened volatility. Declines in interest rates likely supported stock prices over the period, while some positive earnings releases suggested to investors a less pessimistic corporate outlook. One month option-implied volatility on the S&P 500 index— the VIX—decreased but remained significantly above its pre-pandemic levels.
It was assessed that households were in a better position than in the mid-2000s to weather a downturn in house prices, noting that mortgage debt growth has significantly lagged growth in house prices, leaving households with substantial equity cushions.