The minutes are usually released three weeks after the FOMC meeting. They record in detail the committee members' discussions on monetary policy and are an important document for understanding the Fed's decision-making process and economic outlook.

The Fed told the outside world that it would make decisions based on economic data, but in fact it wanted to cut interest rates in July, and the focus of internal discussions was whether to cut interest rates by 50 basis points or 25 basis points. The market's understanding of the Fed is too backward.

The minutes of the Federal Reserve meeting were released, and there were three key sentences in the minutes that surprised Wall Street.

· First sentence: "Some participants" felt that the rise in unemployment and recent progress in reducing inflation provided a reasonable basis for a 25 basis point rate cut at this meeting. "Most participants" said that if economic data continued to meet expectations, it would probably be appropriate to ease monetary policy at the next meeting.

Interpretation: In other words, a small number of people believe that the conditions for a rate cut were met in July, so a rate cut in September is a no-brainer. If it weren’t for the “overall situation”, they would have voted in favor at the July meeting.

· Second sentence: “Most participants” noted that risks to the employment goal had increased, while “many participants” noted that risks to the inflation goal had decreased. “Some participants” noted that further gradual weakening in the labor market could turn into a more severe deterioration.

Interpretation: Pay attention to the wording. "Most of the participants" implies almost everyone, "many participants" implies close to half or more of the people, and "some participants" implies a small number of people. These prefixes are usually important in the minutes of the meeting, showing the differences and consensus among the committee members. What this sentence actually means is that most people see that the job market is beginning to deteriorate, most people believe that the risk of inflation is reduced, and a few people with foresight believe that if interest rates are not cut, there will be problems in the job market. It is worth mentioning that when the Fed held its July meeting, the weak US non-farm payrolls report for July had not yet been released.

· Third sentence: “Many participants” viewed the stance of interest rates as restrictive, and “several participants” viewed that, with inflation pressures continuing to cool, an unchanged interest rate would mean that monetary policy would increase the drag on economic activity.

Interpretation: Some officials have realized that the Federal Reserve has fallen behind the situation, and the Federal Reserve realized this as early as before the release of the July non-farm data.

In short, there is a consensus within the Fed that inflation risks will recede further (fewer policymakers are concerned that a premature rate cut could push inflation back up) and that risks to the job market are gradually increasing.

This was a more aggressive minutes than expected, with most noting the risk of a deteriorating labor market. If that were the case, the Fed should have moved faster and harder, with several 50 basis point rate cuts. Overall, the minutes removed all doubts about a September rate cut, a major dovish shift by the Fed.

The Fed's communication strategy is to make the meeting less market-moving, and they are following the minutes closely.
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