FOMC Commentary

■ Policy Rate Remains Unchanged for Fifth Consecutive Time; 3 of 12 Voting Members Support Rate Hike  
■ Fed Chair Warsh Reiterates Stance on Price Stability, Focuses on July Economic Data and Jackson Hole Meeting 
 
The Federal Reserve (FRB) decided at its Federal Open Market Committee (FOMC) meeting held on July 28-29 to maintain the policy rate at 3.50%–3.75%, marking the fifth consecutive time it has held steady. Three of the 12 voting members voted against the rate hike, with the presidents of the Dallas, Cleveland, and Minneapolis Fed advocating for a 0.25 percentage point increase. The statement noted that despite rising uncertainties such as the situation in the Middle East, the U.S. economy continues to expand robustly; while inflation remains above the 2% target, it is partly affected by supply shocks such as those in the energy sector. The Committee will continue to adhere to its commitment to price stability, largely echoing the wording of the June meeting. 
 
Chairman Warsh stated at the press conference that inflation has been above the target for more than five consecutive years, but the Fed's sole objective remains 2% inflation, and a short-term slowdown in inflation is insufficient to explain the situation. He introduced that the meeting will focus on four topics: (1) the impact of high inflation on policy; (2) the impact of the pandemic, geopolitics, and AI investment on the economy and employment; (3) whether the equipment investment boom reflects widespread inflationary pressure; and (4) the easing effect of interest rate policy and balance sheet policy. The Federal Reserve will continue to discuss these issues in depth to provide a basis for subsequent policy decisions. 
 
In the US financial market, the stock market and the US dollar weakened, the yield on ultra-long-term US Treasury bonds rose, while the yield on 2-year US Treasury bonds, which reflects interest rate expectations, fell. It is still too early to judge that the market trend has changed at this stage. We need to pay attention to the US economic data for July to be released in mid-August and the Jackson Hole meeting to be held at the end of August. I will continue to pay attention to the impact of further stock market declines on the bond and exchange rate markets.