Mitsubishi JF: The details of the minutes of the Fed meeting should not be read too much

On 8 July, the Mitsubishi Journey analyst Derek Halpernny indicated that the Fed would release the June FOMC minutes tonight, but suggested that the details of the minutes should not be over-readed, as the background before the June meeting was very different. It is likely that the dots chart was submitted one week before the meeting (as of the week of 12 June), and if the meeting were to be held now, the FOMC dots chart would not show nine people supporting the interest rate hike. In this respect, the overnight index swap curve seems to be pricing higher interest rates. The potential rate increase at the current meeting on 29 July is still close to 30 per cent, which appears to be excessive given the already weak labour market data. By March 2027, the market had priced an increase in interest rates of nearly 40 basis points, but we believe that there is a greater possibility of a reduction in interest rates by then than an increase. Kim Xian