Fed Minutes Released: What They Really Said

[00:01] minutes from their last meeting and this covers what they discussed and it gives So, let's just jump right into this. Let's not waste any time. So, you can Reserve's websites. It's going to look like this. And I'm showing you this

[00:15] straight from the source. So, I truly have no idea what the media is saying, 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

[00:28] 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

[00:41] 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 cuts in the second quarter of 2027. But I'll just say don't worry. We're

[00:55] 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.

[01:09] the bigger problems the sovereign debt crisis. So, they're saying that investors are now acting more price sensitive to US treasuries, which is a big deal. So this means that investors are no longer just throwing money

[01:24] blindly at US Treasury bills, Treasury notes, and Treasury bonds. So of course, this is not good for the US governments. So they're making this comment because So they're making this comment because we started a war with Iran and normally

[01:37] US treasuries act as a safe haven. But when the war started, when it broke out, their value the 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

[01:51] 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

[02:05] 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

[02:19] 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

[02:31] you their balance sheet, 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

[02:44] 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

[02:57] 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

[03:10] 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

[03:22] its recent pace as retail gasoline prices were expected to decline. Okay. 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

[03:35] that would be good of course as the rate of inflation would slow down and you have to remember this because this is going to be important later on for their expectations. So what you see right here, this is a little bit about what we

[03:47] 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 hole. So it says some participants remarked that productivity gains

[04:02] 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

[04:16] 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

[04:30] 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

[04:43] strength in 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.

[04:56] 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

[05:08] 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.

[05:22] So it proceeds to say that upside risks to price stability remained elevated maximum employments have moderated a bit. A few participants commented that in light of these developments, there was a case for raising interest rates,

[05:37] 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

[05:51] 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

[06:05] here is where they play a game of 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

[06:19] 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

[06:31] market remains stable then policy firming would likely be warranted to return inflation down to 2%. Now, I just want to say that they left themselves a all this. It's not as straightforward as the other scenario if the rate of

[06:46] inflation went down. So, according to them, like here's some examples of what 2.9%. That's the same thing to them. So, it's really, you know, they're trying to get the rate of inflation down to 3%. And

[07:00] policy firming, like that could mean that could 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

[07:13] 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 inflation goes down that they're going to cut rates. And then here the question

[07:27] 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.

[07:40] 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 that participants noted that their

[07:52] future policy actions would depend on the incoming data which is I mean that right there is classic J. Paul talk. And then right here it says that the Federal Reserve has voted and instructed that the Federal Reserve continue to print

[08:05] money when appropriate. So listen again, I've already walked you printing money for the entirety of this year. They continue to print money with Wars as chair of the Federal Reserve. And right here, it confirms that they're

[08:19] just going to keep at it if appropriate. All right. Now, I want to show you the going to do. So, these are market expectations. According to the CME Fed Watch tool, the next Federal Reserve meeting is going to be on July 29th.

[08:33] 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%.

[08:48] Now, after the minutes were released, the odds of them raising interest rates the odds of them raising interest rates in July has fallen from 32.6% 6% to Now, I want to show you the expectation of where interest rates are going to be

[09:01] 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

[09:16] 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 don't have a plan. They're just going to be reactive. And I just want to ask like

[09:30] Federal Reserve under J Powell? Under thing. Like the only thing that we do know is that they're going to continue going to continue to print money if it's appropriate. But it seems like to them

[09:46] every day, any day seems like an appropriate time. Please subscribe. Thank you for the support and wish you a very nice day.