Goldman with the note:
1. The minutes to the June FOMC meeting reported that “various participants” pulled forward their expectations for the appropriate timing of tapering “in light of incoming data”— presumably a reference to higher inflation given the labor market disappointments of the second quarter. “Participants” also viewed being “well positioned” to taper as “important” for “prudent planning.” At the same time, the“substantial further progress” hurdle was “generally” not seen as reached, and“many participants” noted the economy was “far” from its employment goals. Coupled with the “elevated” uncertainty around the path of the labor market and inflation, the minutes implied no firm consensus on the appropriate timing of tapering. While not ruling out a September tapering announcement, the Committee’sagreement to “begin to discuss” plans for tapering “in coming meetings” suggested no urgency either, and we continue to expect a December announcement, with November also a possibility. Also of note, “several participants” advocated tapering MBS purchases “more quickly or earlier” because of elevated housing prices. However, “several” others preferred a commensurate approach “well aligned” with previous guidance and supportive of financial conditions.
2. A “few participants” noted that they expected the conditions for liftoff to be met“somewhat earlier” than they had projected at the prior meeting, consistent with the median participant showing two interest rate hikes by 2023 in the Summary of Economic Projections (vs. no hikes in March). “Some participants” noted that market participants would focus on the projected rate increases and thought it was important to emphasize that the FOMC’s “reaction function or commitment to its monetary policy framework had not changed.”
