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Fed Keeps Silent on Inflation, ECB Changes Inflation Rates

Yesterday, the minutes of the June meeting of the Federal Reserve (Fed) was made public. The FOMC reveal divided views among Fed members leaving some of them concerned about the latest inflation data. Meanwhile, others believe that it may still be a temporary period as the economy recovers from the pandemic.

At the same time, financial markets digested the Fed minutes. The S&P 500 and Nasdaq closed at record highs while U.S. Treasuries stabilized around 1.30% after their recent declines.

The dollar rose, and the oil fell 0,2% to $72.02 a barrel. The fell came after the breakdown of OPEC+ talks, and uncertainty over the resumption of the talks. The EIA United States Crude Oil Stocks Change is scheduled for release today.

Despite the split caused by the Fed minutes, the consensus among Fed officials is the need for an earlier than expected plan in case it becomes necessary. The minutes stated: “various participants mentioned that they expected the conditions for beginning to reduce the pace of asset purchases to be met somewhat earlier than they had anticipated at previous meetings in light of incoming data”.

ECB Separates from Fed Policy

While the Federal Reserve remains on hold, the European Central Bank has agreed to raise the inflation target to 2%. This is a departure from the approach to inflation policy dictated by the Fed last year.

European Central Bank (ECB) President Christine Lagarde, along with the other members, expects inflation to rise above and then fall below the target by the end of the year.

After the summer, policymakers will discuss how to abandon emergency measures including an exceptionally flexible 1.85 trillion euro bond-buying program. The ECB’s news had little impact on the euro. Yesterday, the currency was down 0.2% to $1.1798 following the report.

Tomorrow, the G20 meetings begin in Venice, where climate change, the global tax on multinational companies, globalization, and political and monetary trends, among other things, will be discussed.

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