July FOMC: Liquidity Drain Meets a Hawkish Dissent

The Federal Open Market Committee held its target rate at 3.50 to 3.75 percent on July 29, and the 9-3 vote made the decision look routine. It was not. Three sitting policymakers, Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and New York Fed President Lorie Logan, dissented in favor of a 25 basis point hike rather than a cut, an alignment that would have been unthinkable a year ago when the debate centered on how fast to ease. At the same time, the overnight reverse repo facility, the money market buffer that has absorbed reserve volatility since the pandemic, has fallen to $0.405 billion. That combination, a hawkish dissent bloc and a nearly empty liquidity…