US Federal Reserve makes rate decision
The FOMC decision was not unanimous as Governors Hammack, Kashkari, and Logan voted in favour of a 25 basis point hike.
Personal consumption expenditures (PCE) inflation, a preferred inflation gague by the Fed, reached a three-year high of 4.1 per cent in May. Core PCE was 3.4 per cent for the month. The Fed’s target is two per cent. However, a statistical revamp at the Bureau of Economic Analysis may see those metrics drop by around 0.2 per cent, according to the Financial Times. June PCE data had also softened somewhat, potentially giving the Fed additional leeway in its decision.
Those inflationary concerns were heightened in the lead up to the decision, with Brent crude rising over 15 per cent over the month of July, reflecting the ratcheting up of tensions between the United States and Iran in recent weeks. Iran retains control of the Strait of Hormuz, a crucial passageway for oil, gas, fertilizer, and other hydrocarbons from the Arabian Gulf.
Stocks fell in the leadup to the decision, with the Dow Jones down around 1.5 per cent, the S&P 500 down around 0.7 per cent and the Nasdaq Composite down 0.8 per cent on the day. Two-year treasury bond yields were slightly higher ahead of the decision, but reversed to trade 0.02 per cent lower immediately following the decision.
