FOMC

Federal Reserve Bank of Richmond President Thomas Barkin said the greater-than-expected easing in inflation in June may be an indication that the U.S. economy can have a "soft landing," returning to price stability without a damaging recession.

After July's hike, analysts are mixed on whether the Federal Open Market Committee is done raising rates.

"I haven't made up my mind for what should happen in September," Goolsbee said.

Municipal bond mutual fund saw inflows with Refinitiv Lipper on Thursday reporting investors added $552.219 million to funds for the week ending Wednesday following $1.040 billion of outflows the previous week.

The Investment Company Institute reported investors added $453 million to municipal bond mutual funds in the week ending July 19, after $111 million of inflows the previous week.

Eric Merlis, managing director and co-head of global markets at Citizens Bank, talks with Chip Barnett about the economy and financial markets and what the Federal Reserve might do. He also discusses possible near- and long-term economic scenarios. (15 minutes)

Analysts look at whether the FOMC will bring the last rate hike in the cycle, whether recession is coming, and whether the Fed is making a policy mistake.

Federal Reserve Bank of St. Louis President James Bullard, who called for aggressive interest-rate hikes to fight the recent inflation surge, resigned after 15 years in the position to become dean of a university business school.

"The bond market finally got the relief from inflation it was hoping for," said Bryce Doty, senior vice president and senior portfolio manager at Sit Investment Associates. 

The Federal Reserve needs to raise interest rates a bit further to rein in an inflation rate that's too high, monetary expert John Taylor said.

Municipal bond mutual fund outflows intensified as Refinitiv Lipper reported investors pulled $855.719 million from the funds for the week ending Wednesday following $25.331 million of outflows the week prior.

Federal Reserve Bank of Dallas President Lorie Logan said more interest-rate increases will likely be needed to spur meaningful disinflation and bring price-growth rates back to the central bank's target.

Federal Reserve officials were less united at their June meeting than their unanimous decision suggested, as some favored interest-rate increases but went along with the move to leave policy unchanged.

After holding at its last meeting, the Federal Open Market Committee may decide to raise rates again in July.

Powell is set to appear on Capitol Hill this week for his semi-annual monetary policy testimony, the first time the Fed chief will answer questions from Congress in public since early March.

Those "holding out for wider yields or relative value" are frustrated due to an extremely tight muni range, but FHN Financial's Kim Olsan said, "the reality is that supply has yet to materialize to force that change."

Munis did not follow USTs yet, "but given the outperformance of munis over the last couple days and while I wouldn't be surprised if they weaken a little given how expensive ratios are," said Breckinridge's Matt Buscone.

While "munis are set up for better performance, perhaps modest single-digit returns, the near-term outlook for fund flows will make for a challenging read," Oppenheimer's Jeff Lipton said.

Analysts agree with the market that the Federal Open Market Committee will hold rates in a range of 5% to 5.25%, but guidance will suggest a future hike.

The Federal Open Market Committee is scheduled to meet next week with many experts expecting to see a pause in federal fund rate hikes after ten straight upticks.