On the July FOMC

On a day when Q2 GDP was announced at 3%, the FOMC statement invented a way to say growth “moderated.” At the prior meeting, after GDP showed an outright Q1 contraction, the statement said growth was “solid.” This was the only change in the statement, and it points to a rationale for enough dovishness to ensure two rate cuts this year, as the last two “dot plots” have said all along. Two governors, Waller and Bowman, dissented, preferring a rate cut immediately. Powell was almost comical in his confirmation bias about tariff-driven inflation in the press conference, saying at one point that the Fed has been “looking through goods inflation by not raising rates.” The statement, with its language change and two dissents, is a consensus product – it was dovish. The presser is Powell on his own – it was hawkish. We continued to expect two cuts this year, despite markets moving slightly away from that expectation during the press conference. Powell is just one vote.