US | Support for tightening grows

Summary

Today’s 9-3 voting split at the Fed suggests that support for monetary policy tightening has continued to grow within the Committee. The next policy decision will largely depend on whether upcoming inflation data validate the recent improvement in inflation.

Key points

• Key points:
• The FOMC left the policy rate unchanged at 3.50-3.75%, but the 9-3 voting split underscored the Committee's increasingly hawkish internal debate.
• The press conference was hawkish in tone but deliberately ambiguous on the policy outlook, with Warsh emphasizing the information embedded in financial markets.
• Chair Warsh's introductory remarks maintained a clearly hawkish tone, but his answers during the Q&A were considerably more ambiguous.
• In his view, the recent rise in long-term yields and the USD strengthening indicate that financial markets are already contributing to tighter financial conditions.
• Another pause in September remains, in our view, a plausible baseline scenario, although we continue to see the risks to our outlook as tilted to the upside.

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