PREVIEW: FOMC Minutes due Wednesday 19th August, 2026 at 19:00BST/14:00EDT

• Minutes will be eyed to gauge hawkish sentiment among the wider FOMC
• Markets currently lean towards a hold in September
• There is a risk the minutes are looked through given recent data

The FOMC left rates unchanged at 3.50-3.75% in July, as expected, although the decision drew three dissents, with regional Fed Presidents Logan, Hammack and Kashkari all voting for a 25bps hike. The statement was little changed from June and offered no explicit forward guidance, consistent with Chair Warsh's aversion to signalling the future policy path. The Fed reiterated its commitment to price stability while describing economic activity as expanding at a solid pace, supported by strong productivity and capital investment, alongside steady job gains. With Warsh having moved away from forward guidance, analysts increasingly view each meeting as effectively live.

Markets initially interpreted the decision as dovish, unwinding hawkish positioning built ahead of the meeting, while expectations for a September hold have since risen to around 65% at the time of writing, from roughly 50/50 in recent weeks following inflation and labour market data. The meeting also triggered a pronounced steepening of the Treasury curve, with the front-end richening and the long-end cheapening. The move was partly attributed to increased term premium amid uncertainty over the future policy path given the lack of forward guidance. Warsh also appeared relatively comfortable with the recent tightening in financial conditions, suggesting it was doing some of the Fed's work, potentially reducing the need for the policy rate itself to deliver all of the required tightening. Some have also suggested that the Fed could increasingly lean on balance-sheet policy alongside the FFR to influence financial conditions.

The minutes will therefore be closely watched for how far the hawkish sentiment extended beyond the three dissenters, and whether other officials saw a case for tighter policy despite ultimately voting to hold. Attention will also be on the arguments put forward by the dissenters, particularly concerns that supply shocks and the AI investment boom could entrench inflation pressures, alongside their view that a sufficiently stable labour market gives the Fed room to prioritise restoring price stability. Any indication that the three dissenters had broader sympathy within the Committee could keep the prospect of a September hike alive.

However, data released since the meeting have strengthened the case for patience. July CPI showed both headline and core Y/Y inflation easing, while subsequent PPI data were also softer than expected. July core PCE is currently tracking around 0.2-0.3% M/M, ahead of its August 26th release. Meanwhile, the July payrolls report was notably weak and included sizeable downward revisions to previous months. The combination of easing inflation and softer labour market data has underpinned expectations among some analysts for the Fed to remain on hold, even as inflation remains above target.

There is a risk that markets ultimately look through the minutes given their backward-looking nature, particularly following the significant amount of inflation and labour market data released since the July meeting. Attention may instead remain on the Jackson Hole Economic Symposium later this month, where Chair Warsh is expected to speak. Furthermore, the Fed will receive another round of inflation and employment data before the September FOMC, leaving the near-term policy outlook highly dependent on incoming data.