Minutes from the Federal Reserve's July meeting show that many Fed officials saw a possible need to raise interest rates if inflation does not slow sustainably toward the 2% target. The FOMC voted 9 to 3 to hold rates at 3.50 to 3.75 percent, while three members, Beth Hammack, Lorie Logan, and Neel Kashkari, supported another quarter-point increase. Latest data show the PCE index fell 0.1 percent in June from the previous month but remained 3.7 percent higher than a year earlier, and nonfarm payrolls dropped by 23,000 jobs in July. As a result, investors pushed back their expectations for a rate hike to December, after some had previously expected a move in September. The Fed also discussed the idea of reducing the number of policy meetings from eight to about six per year, but no decision was made.
Fed signals possible rate hikes if inflation persists, supporting higher policy rate.
Hawkish Fed stance and potential rate hikes push long-term yields up.
