Fed Minutes Released What They Really Said

The Federal Reserve released their minutes from their last meeting and this covers what they discussed and it gives us clues about what they're going to do. So let's just jump right into this let's not waste any time. So you can find the minutes on the Federal Reserve's websites it's going to look like this and I'm showing you this straight from the source so I truly have no idea what the media is saying how they're spinning it. I'm not interested in that because again we're going to look for ourselves straight from the source. So their last meeting concluded on June 17th and these minutes were released this afternoon on July 8th. So the pdf is 15 pages long so I'm just going to go through the highlights in order from page one to the end. Here's the first thing that I want to show you the Federal Reserve is saying that in their survey the median response implied no changes to interest rates for the remainder of 2026 and their internal expectation is a rate cut in the second quarter of 2027. But I'll just say don't worry we're going to compare this to market expectations which I'm going to show you the odds about how they changed before and after the minutes. Okay now here's something very interesting as you know we cover the sovereign debt crisis well the debt crisis in general but the bigger problem is the sovereign debt crisis. So they're saying that investors are now acting more price sensitive to U.S. Treasuries which is a big deal. So this means that investors are no longer just throwing money blindly at U.S. Treasury bills, Treasury notes, and Treasury bonds. So of course this is not good for the U.S. governments. So they're making this comment because we started a war with Iran and normally U.S. Treasuries act as a safe haven but when the war started when it broke out their value the value of Treasuries went down and interest rates went up which is the opposite of what you know one would normally expect. So it says the manager commented that the ownership composition of Treasury securities have shifted somewhat over the past several years from relatively price insensitive official sector holders to more price sensitive private investors. Now moving on we get to inflation. The Federal Reserve is saying that both total and core inflation are higher than they were a year ago. So they stated that it's due to a variety of factors including tariffs, higher energy costs, and the surge in demand related to the AI buildouts. I do want to mention that they forgot to add in the parts about them printing more and more money you know billions of dollars which we covered in thorough detail and I showed you their balance sheets but they omitted that part. So that's typical of them not surprised. Now when it comes to financing or basically just the ability to get a loan it says financing conditions in domestic credit markets remain generally accommodative for larger business and municipalities but somewhat restrictive for small businesses and households. Credit conditions remain somewhat tight for small businesses and household borrowers with lower credit scores. Okay so if you need financing it's going to be more available basically easier to access for big businesses and not so much for smaller businesses you know small business households or people with lower credit scores that's what it essentially means. Okay now we're going back to inflation. It says total inflation was projected to slow over the second half of this year from its recent pace as retail gasoline prices were expected to decline. Okay so if energy prices were to decline which they have because you have to remember this was discussed at their June meeting then that you know that would be good of course as the rate of inflation would slow down and you have to remember this because this is gonna be important later on for their expectations. So what you see right here this is a little bit about what we touched upon earlier in previous videos and this is the theory behind how AI will potentially save the United States of America. We're talking about the fiscal problems like get us out of that hole. So it says some participants remarked that productivity gains associated with AI adoption would eventually reduce production costs and increase aggregate supply which should put downward pressure on inflation though they noted that this effect would likely take time to materialize. And I just want to pose this question to you again. What's one thing or at least one way that we can save us ourselves from this debt crisis that we're in? It's if we grew our way out of it with massive productivity gains and the government is looking at AI as our nation's solution and is it going to be the answer? Well it remains to be seen. And then the Federal Reserve expanded upon AI. So here's what they said. Participants generally noted that the strength and business investment remained concentrated in AI related expenditures which showed no signs of slowing as companies continue to announce capital expenditure plans that exceeded earlier expectations. Okay so I believe that one's very straightforward. Okay now this is where things become more important. Well regarding the regarding what they're going to do at future meetings regarding interest rates. So it says and this is referring to their June meeting. At this meeting all participants supported to maintain the current target range for the federal funds rates and that just means that none of the participants wanted to raise interest rates in June. So it proceeds to say that upside risks to price stability remained elevated while downside risks to achieving maximum employments have moderated a bit. A few participants commented that in light of these developments there was a case for raising interest rates but those participants supported maintaining interest rates the same at this meeting. And then it says several participants remarked that they did not see the current policy as restrictive which means that they don't think that interest rates are too high at the moment. While a few other participants commented that they saw the current policy as slightly restrictive which means that those people who said that they believe that interest rates are slightly too high right now. And right here is where they play a basically what if. So they talked about some scenarios they said that if the rate of inflation starts going down then in this case almost all participants said that it would it would likely be appropriate to maintain or eventually lower interest rates. And then they discussed the other scenario what would happen if the rate of inflation stays elevated. So it says that most participants said that if the labor market remains stable then policy firming would likely be warranted to return inflation down to two percent. Now I just want to say that they left themselves a lot of wiggle room in how they worded all this. It's not as straightforward as the other scenario if the rate of inflation went down. So according to them like here's some examples of what I mean. So according to them 2.0 percent and 2.9 percent that's the same thing to them. So it's really you know they're trying to get the rate of inflation down to three percent. And policy firming like that can mean a whole variety of things. Policy firming that could mean not cutting interest rates for a longer period of time, it could mean less money printing, or it could mean raising interest rates. So there's a lot of wiggle room with how they worded this scenario like what they would do in this type of scenario unlike the other scenario where it says that if inflation goes down that they're going to cut rates. And then here the question is what will be the most likely scenario. It says that many participants indicated that the appropriate level of interest rates will be within or slightly below the current range at the end of this year. Okay and then immediately after that it says that many other participants however assessed that the appropriate level of interest rates would be higher at the end of this year. And it says the participants noted that their future policy actions would depend on the incoming data which is that right there's classic Jay Powell talk. And then right here it says that the Federal Reserve has voted and instructed that the Federal Reserve continue to print money when appropriate. So listen again I've already walked you through the SOMA figures they've been printing money for the entirety of this year. They continue to print money with Warsh as chair of the Federal Reserve and right here it confirms that they're just going to keep at it if appropriate. All right now I want to show you the of what the Federal Reserve is going to do. So these are market expectations according to the CME FedWatch tool. The next Federal Reserve meeting is going to be on July 29th. Before the minutes were released there was a 67.4% chance that the Federal Reserve does not change interest rates at that meeting and a 32.6% chance that the Federal Reserve raises interest rates at that meeting by 0.25%. Now after the minutes were released the odds of them raising interest rates in July has fallen from 32.6% to 30.5%. Now I want to show you the expectation of where interest rates are going to be at the end of the year. Before the minutes there was an 85.8% chance that interest rates would be higher at year end than they are today. And after the minutes the odds they barely changed. It went from an 85.8% chance that rates will be higher down to 85.1% so barely any effect. All right my interpretation is that the Federal Reserve does not have a plan. Like they're not going to be proactive. They don't have a plan. They're just going to be reactive. And I just want to ask like how is this any different from the Federal Reserve under Jay Powell? Under Warsh it seems like more of the same thing. Like the only thing that we do know is that they're going to continue to print money. And okay well they're going to continue to print money if it's appropriate. But it seems like to them every day any day seems like an appropriate time. Please subscribe. Thank you for the support. I wish you a very nice day. Take care.