The Fed released minutes of its June 13-14 meeting yesterday, revealing discussions around interest rate policy and details of its plan to begin the unwind of its $4.5 trillion balance sheet.  Disappointing for the markets, the minutes gave no clear signal, with policymakers split on the outlook for inflation and how that might affect the rate of future interest rate hikes.  There was also dissension on the issue of whether the Fed should start the process of reducing its large portfolio of Treasury bonds and mortgage-backed securities by the end of August or to wait until later in the year.

Economists largely expect the Fed to begin shrinking its balance sheet at its September meeting before raising rates again at its final meeting of the year in December.  According to Fed funds futures data, investors’ expectations are also for the next rate increase to occur in December.

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