The Federal Open Market Committee (FOMC) participants focused on the current high levels of inflation and their potential impacts. There appeared to be a mixed response after the Fed released the minutes of its July meeting yesterday. Initially, investors interpreted the minutes as doveish. However, both the S&P 500 index (NYSEARCA: VOO) and the NASDAQ Composite Index (INDEXNASDAQ: IXIC) ended the trading day down 0.72% and 1.25%, respectively.

What were some key points from the FOMC meeting minutes?

The most important takeaway from the minutes was that the committee members indicated they would prioritize fighting inflation ahead of economic growth for much longer than investors had initially priced in. Interest rates will continue to rise until inflation rates fall substantially. The minutes recorded that:

"Participants recognized that policy firming could slow the pace of economic growth, but they saw the return of inflation to 2 percent as critical to achieving maximum employment on a sustained basis."

Some committee members indicated that once rates increased to the point where they were cooling down the economy to a sufficient level, it would be appropriate to maintain that level to ensure that inflation was returning to the Fed's target rate of 2%.

There was no specific guidance for future increases set during the meeting. Instead, the members agreed their assessments would take into account a wide range of information, such as readings on public health, labor market conditions, financial and international developments, inflation rates, and inflation expectations. This would allow them to better tailor the next rate increase, although there seems to be some support for another 0.75% increase. 

While the FOMC focused on inflation, they also made several comments about the outlook for the U.S. economy. The minutes stated that:

"Participants anticipated that U.S. real GDP would expand in the second half of the year, but many expected that growth in economic activity would be at a below-trend pace."

How will the FOMC meeting minutes impact investors?

After the Fed released the minutes of the July meeting, investors were doveish, causing stocks to climb higher. However, this rally was short-lived as many investors later realized that the Fed was indicating it was willing to reduce economic growth to stamp out the high inflation rates we are experiencing. 

Traditionally stock prices rise as the economy grows and fall when it declines. This is because investor sentiment changes depending on the direction the economy is moving in. Many investors are now reevaluating their holdings and selling off stocks they believe will see the sharpest decline if we enter a recession -- which has become more probable over the short term. 

For investors with a long-term outlook and high-risk tolerance, the coming weeks and months could provide a good buying opportunity to pick up some cheap growth stocks, as it is highly likely we have not seen the end of falling share prices. This will allow you to benefit from dollar cost averaging and potentially lead to higher future returns. 

For those with lower risk tolerance, now might be the time to look at some blue chip stocks and other low-risk, low-return assets. However, these assets will likely become more expensive soon as investors start to pile into them.