What to expect from the rest of the year for US monetary policy

THE forthcoming Federal Open Market Committee (FOMC) meeting may be a relatively subdued gathering, leaving exciting loose ends for September. Meanwhile, the US dollar could trade around current ranges with a modest softening bias over the rest of the year.

The FOMC meets from Jul 25 to Jul 26, and a 25-basis-point hike in the Fed Funds rate (FFR) is inevitable. The “skip” from the last meeting foreshadowed a hike in July – and potentially another in September. Markets unanimously expect a July hike, and Federal Reserve officials haven’t pushed back.

Since the June FOMC meeting, and in view of favourable inflation prints and softer employment data, markets no longer anticipate a September hike. While that may prove right, they might be getting ahead of themselves.