What to expect from the July FOMC statement

With the market strongly expecting this course of action, the most likely (and least risky for the Committee) outcome for the July 31 statement will be only minimal change beyond an update of recent economic developments.

What they say on the data could depend on how the new and revised GDP numbers look tomorrow–of particular interest will be any revisions of core and headline PCE inflation. Also, Bernanke will have the upcoming ISM numbers, this week’s jobless claims data, and the manufacturing sector portion of the payroll employment report. In brief, we expect the Committee’s message on economic developments to be that despite soft Q2 growth, prospects for a decent pickup in H2 remain intact. And on the inflation front, the recent spate of low core consumer price inflation is still seen as transitory.

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