Fed’s Internal Rate Debate Faces New Scrutiny

Summary

BMO Capital Markets Senior Economist Jennifer Lee discusses the upcoming FOMC minutes, Fed communication, the rate outlook, Treasury yields, and oil. She expects the Fed to stay on hold until late 2027 before leaning toward a cut. She also sees 10-year Treasury yields possibly reaching 5% and views oil near $80 as absorbable but capped.

• FOMC minutes may reveal internal Fed debate and the unusual three dissents from the last meeting.
• BMO expects no Fed rate move until late 2027, then leaning toward a cut.
• Lee sees 10-year Treasury yields potentially hitting 5% sooner rather than later.
• Oil prices around $80-$85 are seen as absorbable, with BMO forecasting a high-$70s average.
• China's reserve drawdowns, slower economy, and EV adoption are helping cap oil prices.
• Fed Chair Kevin Walsh is expected to offer little rate direction at Jackson Hole.