The deputy manager turned first to a discussion of financial market developments. Financial markets over the intermeeting period reflected elevated uncertainty about the outlook. Most market participants appeared to view a moderation of inflation and slower, but still positive, economic growth ahead as the most likely scenario. However, investors appeared to be increasingly attentive to downside risks to the economy in light of the potential for shocks from abroad and the continued upside surprises to inflation. On net, financial conditions eased modestly over the period but remained substantially tighter than at the start of the year. Treasury yields fell, reflecting expectations of slower growth as well as a decline in inflation compensation. Respondents to the Open Market Desk's surveys of primary dealers and market participants marked down their growth forecasts for 2022 and 2023 and attached higher odds than in the June survey to the possibility that the U.S. economy could enter a recession in coming quarters. Market participants perceived falling commodity prices—particularly for oil—and the FOMC's commitment to bringing inflation down as pointing to lower inflation ahead. Market-based measures of near-dated inflation compensation declined and continued to suggest that inflation would ease in coming quarters. In the Desk surveys, respondents also expected inflation to decline substantially in 2023 but assigned meaningful probabilities to a wide range of potential outcomes, including scenarios involving continued elevated rates of inflation. Far-forward market-based measures of inflation compensation fell over the period. These measures continued to suggest that inflation would return over time to the Committee's 2 percent objective. In their assessment of the policy outlook, market participants expected significant policy tightening in coming meetings as the Committee continued to respond to the current elevated level of inflation. Nearly all respondents to the Desk survey anticipated a 75 basis point increase in the target range at the current meeting, and most expected a 50 basis point increase in September to follow. The market-implied path of the federal funds rate indicated a peak policy rate of around 3.4 percent, significantly lower than at the time of the June meeting. The market-implied path suggested expectations that the policy rate would fall thereafter. Most respondents to the Desk survey expected the federal funds rate to remain above the survey's longer-run policy rate of 2.4 percent through the end of 2024, but, on average, respondents placed significant probabilities on lower rate outcomes. Regarding developments abroad, central banks in advanced foreign economies (AFEs) had quickened the pace of policy tightening in order to address above-target inflation. Eight advanced-economy central banks raised their policy rates over the period. Along lines similar to U.S. developments, market-implied policy rates in most AFEs fell at longer horizons and reflected expectations that policy rates would reach peak levels by early 2023. In contrast to central banks in other advanced economies, the Bank of Japan confirmed its commitment to accommodative policy. In this environment, the exchange value of the dollar appreciated further, surpassing its March 2020 peak against advanced-economy currencies. The deputy manager next turned to a discussion of money markets and Desk operations. The 75 basis point increase in the target range at the June meeting passed through fully to the federal funds rate and other overnight rates. Although downward pressure on overnight secured rates had persisted, the pronounced softness observed in the past intermeeting period had abated to some degree. The overnight reverse repurchase agreement (ON RRP) facility continued to support policy implementation, and balances remained elevated. The deputy manager anticipated that, in the near term, the evolution of take-up at the ON RRP facility would continue to depend on changes in the supply of safe, short-term investments, and the demand for such investments by money market mutual funds (MMMFs). ON RRP balances were expected to decline over time as balance sheet runoff proceeded. T tweet at 2:00pm: [DB] ALL FED OFFICIALS BACKED RAISING RATES BY 75 BPS AT JULY FOMC tweet at 2:01pm: *FOMC Minutes: Some Officials Say Appropriate to Maintain Restrictive Policy 'For Some Time' tweet at 2:01pm: FED MINUTES: PARTICIPANTS 'EMPHASIZED' THAT SLOWDOWN IN DEMAND WOULD 'PLAY AN IMPORTANT ROLE' IN REDUCING INFLATION tweet at 2:02pm: *FOMC Minutes: Fed Staff Expects Unemployment Rate to Start Rising in 2H 2022