Fed Minutes Suggest Inflation Concerns as Euro Surges on Strong Data
The Federal Reserve's July meeting minutes revealed that policymakers are concerned about inflation and may need to tighten policy if it doesn't decline. The FOMC minutes also showed no discussion of easing policy, with new Fed Chair Kevin Warsh suggesting a possible reduction in the number of monetary policy meetings from eight to six per year.
The US Treasury's buyback of long-end bonds has been interpreted as an effort to suppress elevated yields and support economic growth. Meanwhile, in Europe, the Eurozone Harmonized Index of Consumer Prices (HICP) rose to 2.9% in July, matching preliminary forecasts, and underlying inflation expanded at a 2.5% pace.
The data further strengthens the case for higher interest rates in Europe, with the European Central Bank (ECB) expected to increase rates by 25 basis points at its September 10 meeting. The money market has priced in an 88% chance of a rate hike, according to Prime Terminal data.