The latest "Minutes of the Federal Open Market Committee (​FOMC) for the Fed'​s July 28-​29 Meeting tell us, "Nominal Treasury yields rose 25 to 30 basis points, driven by corresponding increases in real interest rates. Market pricing and outreach indicated that, while investors expected no action at the July FOMC meeting as a base case, the market priced in about a one-​in-​three chance of an increase in the target range for the federal funds rate. At longer horizons, the market was fully pricing in a 25 basis point hike by the September meeting and another one by the end of the first quarter of next year. The median respondent to the Desk survey, by contrast, expected no change in the policy rate this year or the next but expected a rate cut in early 2028." The Minutes explain, "The manager observed that money markets remained generally stable. Repurchase agreement (​repo) rates again went through a brief period of softness earlier in the period and temporarily dragged the effective federal funds rate (​EFFR) down 1 basis point. Repo rates recovered quickly, the EFFR returned to its earlier level, and money market rates generally ended the period little changed, on net, and close to the interest rate on reserve balances." They comment, "Over the intermeeting period, both the market-​implied expected path of the federal funds rate and nominal Treasury yields moved up somewhat, in part reflecting FOMC communications that were perceived as more restrictive than expected amid an economic outlook that was little changed. The market-​implied policy rate path shifted moderately higher, as did option-​implied probability distributions of short-​term interest rates. Market-​implied measures of interest rate volatility remained largely unchanged, on net. Nominal Treasury yields rose, driven by increases in real yields. Short-​term inflation compensation declined notably, largely reflecting technical factors related to indexation lags and the passage of time. Market-​based measures of longer-​term inflation compensation and survey based measures of inflation expectations remained well anchored." The Fed'​s Minutes add, "In support of the Committee'​s dual-​mandate goals, nine members agreed to maintain the target range for the federal funds rate at 3.​5 to 3.​75 percent and also reaffirmed the FOMC'​s policy of maintaining ample reserves in the banking system. Members noted that the unemployment rate was largely unchanged and that solid growth in economic activity had continued, while inflation remained elevated relative to the Committee’​s 2 percent goal. In June, the Committee had underlined its continuing resolve to achieve its dual-​mandate goals by indicating in its postmeeting statement that it '​will deliver price stability.' Almost all members agreed that it was appropriate to retain this language in July'​s postmeeting statement. Three members voted against the decision to maintain the target range for the federal funds rate, preferring an increase of 25 basis points in the target range at this meeting."

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