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The minutes also settled how the July joint US-Japan intervention was executed. The desk manager’s account says the late-July operation directly contributed to dollar depreciation given the yen’s weight in currency indexes, and states that the Desk, “acting purely as fiscal agent for the U.S. Treasury, intervened in the currency market using U.S. Treasury funds; the System Open Market Account portfolio was not involved.” Bloomberg first flagged the disclosure, which confirms the operation ran entirely on Treasury balance sheet, not Fed money creation.
Earlier
The Federal Reserve released the minutes of its September 15-16 meeting at 2:00pm ET Wednesday, the session that delivered the first rate hike in three years under new Chair Kevin Warsh. The account shows a Committee that hiked together and stayed hawkish together: all participants supported the 25bp move to a 3-3/4 to 4 percent target range, the formal vote was 12-0 with no dissents, and “most participants assessed that another increase in the target range for the federal funds rate would likely be appropriate by year end.” Participants stressed they approach each meeting with an open mind and that future decisions depend on incoming data, but the directional signal is unmistakable.
The substance backs the hawkishness. Staff estimated August PCE inflation at 3.8 percent (3.4 percent core) and projected inflation would not reach 2 percent until 2029, with the inflation forecast for 2026 through 2028 revised higher than at the July meeting and risks “skewed to the upside.” Participants saw inflation risk tilting up from tariffs, elevated energy prices and the AI buildout, and several said the current policy rate was “not restrictive or only mildly restrictive.” A couple of participants raised their estimates of the neutral rate. The next meeting is October 27-28, per the minutes.
The read is in line with the morning’s market setup, which had December hike odds near 86 percent and October near 22 percent on CME FedWatch. Bond markets took the day’s other scheduled event in stride: the $39 billion 10-year auction stopped strong, with indirect bidders taking 80.3 percent against a 72.4 percent 10-auction average and dealers left with just 2.5 percent, the high yield at 5.3 percent, the dearest since 2000, per CNBC. The 10-year eased to about 5.29 percent after touching 5.35 percent, its highest since 2002, though it stayed up on the day. The $22 billion 30-year auction lands Thursday alongside a $4 billion buyback in long maturities, double the normal size.