While the September 20 FOMC meeting is still about a month away, Fed-related headlines in both the recent past and upcoming future are still greeting investors. In terms of the former, the markets received the minutes of the July FOMC meeting last week, and for the latter, the Kansas City Fed’s annual Jackson Hole symposium is expected to feature Chairman Powell later this week.

Let’s look at the July 2023 minutes first. More recently, the FOMC minutes have taken on more interest, given that they typically get released about three weeks after the most recent policy gathering. Although Fed transparency has come a long way from years past and now includes a “presser” from the Fed Chair after each FOMC meeting, investors are still keen to find any potential nuances from the actual minutes of the convocation itself.

It is against this backdrop and one where the Fed is either at, or close to, the end of this rate hike cycle, that the July minutes took on an even greater degree of interest. The bottom-line message appears to be a bit of a split among the voting members concerning the need for additional rate hikes. There seems to be a contingent that favors further increases and another that feels rates can now be held steady. The most important takeaway is that rate cuts are no longer part of the money and bond markets’ equation, as the Fed appears poised to keep rates higher for longer.

Actually, it’s fascinating to see how the Fed Funds Futures market has shifted its tune in a relatively short time. The day after the May FOMC meeting, the implied probability for Fed Funds showed rate cuts beginning as soon as the aforementioned July 26 FOMC meeting and ultimately resulting in further decreases to take the target down to 3.93% by January of next year. Fast-forward to the current readings, and one will discover no rate cuts priced in until the end of Q1 of next year and a December 2024 level of 4.28%, still not back to the low watermark from the May 4 reading. In other words, the magnitude of rate cuts expected only three months ago has now been pushed back by at least a full year!

That brings us to Jackson Hole 2023. Usually, the Fed Chair’s appearance at this annual event can make headlines and is closely watched by the markets. This time around should be no different. Powell will more than likely keep the Fed’s options open regarding another rate hike, rendering September a “live” meeting. However, much like what was emphasized in the minutes, the policy maker will be looking at the “totality” of incoming data before making its decision.

Stay tuned… a lot of economic/inflation data will need to be processed by the Fed as well as the money and bond markets before September 20.