The minutes of the June Federal Reserve interest rate meeting were released, and the market reaction was muted.
2026-07-09 02:51:10
On Wednesday (July 8), the US dollar index traded sideways during the US session. Following the release of the Federal Open Market Committee (FOMC) meeting minutes, the index continued to fluctuate slightly around the 101 level. Earlier in the day, geopolitical tensions in the Middle East escalated again, but the market had already priced in the related positive factors, and risk-hedging buying gradually subsided.
The market remained relatively calm after the release of the minutes, seemingly without any significant fluctuations. However, the documents themselves revealed substantial disagreements. While the decision to maintain the interest rate at 3.50%-3.75% was unanimously approved by all 12 committee members, aside from the final vote, the members found it nearly impossible to reach a consensus on other core issues.
Unanimous vote, three points of contention
Although all committee members voted to pause interest rate hikes in June, the post-meeting policy statement was also significantly simplified, consisting of only a few lines of text, with its core focus on the fundamental commitment to stabilizing prices.
However, the minutes revealed the differences behind this "unanimous consensus": several committee members explicitly proposed raising the benchmark interest rate at the meeting, and the final agreement to suspend interest rate hikes was only due to timing considerations, rather than a genuine agreement that there was no need to tighten monetary policy.
Compared to the one-sided voting results, officials' predictions on the path of interest rates at the end of the year were more divergent. Many members believed that the appropriate federal funds rate would remain in its current range or even slightly lower by December; however, an equal number of officials judged that interest rates would need to rise.
This dot plot included 18 officials' forecasts: 9 predicted at least one rate hike this year, 8 chose to keep rates unchanged, and only 1 predicted a rate cut. Several committee members stated bluntly that the current monetary policy environment is hardly restrictive.
The Federal Reserve also removed previous wording that hinted at an accommodative stance, and the vast majority of committee members explicitly supported this adjustment. The Fed Chair also announced the formation of five independent task forces to re-examine the implementation framework of monetary policy.
Coupled with the Fed chairman's public remarks in Portugal last week, in which he refused to provide any forward policy guidance, the overall signal is clear: the Fed is in the process of reconstructing its policy response logic, rather than quietly paving the way for interest rate cuts.
The 4% inflation figure provides strong support for hawkish views.
Federal Reserve staff calculations show that the overall U.S. personal consumption expenditures (PCE) inflation rate reached 4.1% in May, while core PCE inflation was close to 3.4%. Officials believe that the rise in inflation is due to multiple factors: the transmission of tariff costs downstream, supply chain disruptions caused by the obstruction of the Strait of Hormuz, and a sustained demand boom fueled by the expansion of the artificial intelligence industry.
Several committee members warned that upward pressure on prices has spread to multiple sectors, including transportation, airfares, petrochemical raw materials, and agricultural production materials. This widespread inflation means that price increases caused by supply shocks will be difficult to absorb and reduce quickly.
The committee judged that upside risks to inflation still dominate, and staff reiterated that inflation having exceeded the policy target for five consecutive years is a long-term hidden danger that cannot be ignored.
Related scenario simulations also leaned towards negative inflation: In most of the economic scenarios simulated by the committee members, the three major factors of artificial intelligence demand, Middle East geopolitics, and import tariffs would continue to push up prices. Almost all officials agreed that it would be necessary to further tighten monetary policy in such an environment.
The latest economic forecasts in June already reflect this trend: the overall inflation forecast for the whole year has been revised upward to 3.6% from the previous March forecast of 2.7%.
Market transaction pricing, disagreements gradually settled.
The market pricing details disclosed in the minutes clearly reflect the long-short game among trading institutions.
Ahead of the June policy meeting, a survey of primary dealers by the Federal Reserve showed that the market generally expected interest rates to remain unchanged until early 2027, with rate cuts not expected to begin until the second quarter of 2027; however, the pricing in the over-the-counter secondary market was quite the opposite, betting on a rate hike before mid-2027.
Three weeks later, market expectations have completely shifted: current futures pricing indicates that there is about a one-third probability of a rate hike in July, and a rate hike in September is the mainstream market expectation. The federal funds rate is expected to eventually rise to around 4% for the whole year.
During the interval between two interest rate meetings, the US Treasury yield spread became the core driver of the dollar's strength. The yield on the two-year US Treasury note rose far more than that of similar bonds in other developed economies, leading to a moderate increase in the dollar index.
However, negative constraints also exist: the market is still betting that the European Central Bank and the Bank of England will each raise interest rates once more this year; at the same time, the June non-farm payroll data fell short of expectations, which restricts the market from over-betting on the Fed's hawkish policy.
The market reaction to the release of these minutes was muted, as the June dot plot had already signaled a hawkish bias, and the market had priced in the gains. The minutes were more of a confirmation of existing expectations than new major news.
The upcoming economic data release schedule will become increasingly packed: the US Consumer Price Index (CPI) for June will be released on July 14 at 00:30 Beijing time, followed by the next FOMC interest rate meeting on July 28-29.
If the overall CPI reaches 4% again, the continued tightening of monetary policy will be upgraded from an alternative scenario to the baseline scenario, and the US dollar will likely usher in a new round of upward trend.
Key technical levels for the US dollar index
The intraday high of 101.27 forms the first short-term resistance level; on Wednesday, the price attempted to rise three times, but all three times it was blocked and fell back below 101.30.
If the closing price holds above this level, it will open up upside potential, with the next target being the psychological level of 101.50, which many investment banks have considered a strong short-term resistance level this week.
The 101 level is the key battleground between bulls and bears during the day, and it is also the closing price for the day; the key support level below is the intraday low of 100.95.
Once this support level is broken, the index will begin its downward test of 100.50, with no significant key technical support between the two levels.
Market Trend Judgment
As long as the support level of 100.95 holds, the overall outlook remains bullish, with a target of breaking through 101.27 and moving towards 101.50. If the index breaks below 100.95, the bullish logic will fail, and the market focus will shift to 100.50.
The market remained relatively calm after the release of the minutes, seemingly without any significant fluctuations. However, the documents themselves revealed substantial disagreements. While the decision to maintain the interest rate at 3.50%-3.75% was unanimously approved by all 12 committee members, aside from the final vote, the members found it nearly impossible to reach a consensus on other core issues.
Unanimous vote, three points of contention
Although all committee members voted to pause interest rate hikes in June, the post-meeting policy statement was also significantly simplified, consisting of only a few lines of text, with its core focus on the fundamental commitment to stabilizing prices.
However, the minutes revealed the differences behind this "unanimous consensus": several committee members explicitly proposed raising the benchmark interest rate at the meeting, and the final agreement to suspend interest rate hikes was only due to timing considerations, rather than a genuine agreement that there was no need to tighten monetary policy.
Compared to the one-sided voting results, officials' predictions on the path of interest rates at the end of the year were more divergent. Many members believed that the appropriate federal funds rate would remain in its current range or even slightly lower by December; however, an equal number of officials judged that interest rates would need to rise.
This dot plot included 18 officials' forecasts: 9 predicted at least one rate hike this year, 8 chose to keep rates unchanged, and only 1 predicted a rate cut. Several committee members stated bluntly that the current monetary policy environment is hardly restrictive.
The Federal Reserve also removed previous wording that hinted at an accommodative stance, and the vast majority of committee members explicitly supported this adjustment. The Fed Chair also announced the formation of five independent task forces to re-examine the implementation framework of monetary policy.
Coupled with the Fed chairman's public remarks in Portugal last week, in which he refused to provide any forward policy guidance, the overall signal is clear: the Fed is in the process of reconstructing its policy response logic, rather than quietly paving the way for interest rate cuts.
The 4% inflation figure provides strong support for hawkish views.
Federal Reserve staff calculations show that the overall U.S. personal consumption expenditures (PCE) inflation rate reached 4.1% in May, while core PCE inflation was close to 3.4%. Officials believe that the rise in inflation is due to multiple factors: the transmission of tariff costs downstream, supply chain disruptions caused by the obstruction of the Strait of Hormuz, and a sustained demand boom fueled by the expansion of the artificial intelligence industry.
Several committee members warned that upward pressure on prices has spread to multiple sectors, including transportation, airfares, petrochemical raw materials, and agricultural production materials. This widespread inflation means that price increases caused by supply shocks will be difficult to absorb and reduce quickly.
The committee judged that upside risks to inflation still dominate, and staff reiterated that inflation having exceeded the policy target for five consecutive years is a long-term hidden danger that cannot be ignored.
Related scenario simulations also leaned towards negative inflation: In most of the economic scenarios simulated by the committee members, the three major factors of artificial intelligence demand, Middle East geopolitics, and import tariffs would continue to push up prices. Almost all officials agreed that it would be necessary to further tighten monetary policy in such an environment.
The latest economic forecasts in June already reflect this trend: the overall inflation forecast for the whole year has been revised upward to 3.6% from the previous March forecast of 2.7%.
Market transaction pricing, disagreements gradually settled.
The market pricing details disclosed in the minutes clearly reflect the long-short game among trading institutions.
Ahead of the June policy meeting, a survey of primary dealers by the Federal Reserve showed that the market generally expected interest rates to remain unchanged until early 2027, with rate cuts not expected to begin until the second quarter of 2027; however, the pricing in the over-the-counter secondary market was quite the opposite, betting on a rate hike before mid-2027.
Three weeks later, market expectations have completely shifted: current futures pricing indicates that there is about a one-third probability of a rate hike in July, and a rate hike in September is the mainstream market expectation. The federal funds rate is expected to eventually rise to around 4% for the whole year.
During the interval between two interest rate meetings, the US Treasury yield spread became the core driver of the dollar's strength. The yield on the two-year US Treasury note rose far more than that of similar bonds in other developed economies, leading to a moderate increase in the dollar index.
However, negative constraints also exist: the market is still betting that the European Central Bank and the Bank of England will each raise interest rates once more this year; at the same time, the June non-farm payroll data fell short of expectations, which restricts the market from over-betting on the Fed's hawkish policy.
The market reaction to the release of these minutes was muted, as the June dot plot had already signaled a hawkish bias, and the market had priced in the gains. The minutes were more of a confirmation of existing expectations than new major news.
The upcoming economic data release schedule will become increasingly packed: the US Consumer Price Index (CPI) for June will be released on July 14 at 00:30 Beijing time, followed by the next FOMC interest rate meeting on July 28-29.
If the overall CPI reaches 4% again, the continued tightening of monetary policy will be upgraded from an alternative scenario to the baseline scenario, and the US dollar will likely usher in a new round of upward trend.
Key technical levels for the US dollar index
The intraday high of 101.27 forms the first short-term resistance level; on Wednesday, the price attempted to rise three times, but all three times it was blocked and fell back below 101.30.
If the closing price holds above this level, it will open up upside potential, with the next target being the psychological level of 101.50, which many investment banks have considered a strong short-term resistance level this week.
The 101 level is the key battleground between bulls and bears during the day, and it is also the closing price for the day; the key support level below is the intraday low of 100.95.
Once this support level is broken, the index will begin its downward test of 100.50, with no significant key technical support between the two levels.
Market Trend Judgment
As long as the support level of 100.95 holds, the overall outlook remains bullish, with a target of breaking through 101.27 and moving towards 101.50. If the index breaks below 100.95, the bullish logic will fail, and the market focus will shift to 100.50.
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