The firms surveyed were the Fed’s so-called primary dealers, firms that trade billions of dollars of government securities with the Fed each day and must meet various broker financial requirements to participate. Dudley said that every gathering was “live” for policy action and he supported the decision last month to leave rates unchanged near zero.
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But he warned: “There’s a few turnaround in sentiment but investors’ confidence will fade easily if the economy doesn’t recover as expected and increases the market’s volatility”. Invest in them as they are a better choice than bonds since they offer regular dividends.
He spoke a day after the release of the meeting minutes from the mid-September FOMC meeting.
The minutes showed that Fed members were concerned about global growth risks and decided it was prudent to wait for additional information before raising interest rates.
Mr. Lockhart said the idea the Fed might face economic conditions so worrisome that it would have to turn to fresh stimulus efforts are unlikely.
“When the dust settled the message for the market was that the FOMC was pretty confident on the robustness of the US economy and saw room for 2015 lift-off, but no imperative to do so if fragility persisted”, Steven Englander, global head of currency strategy at Citi, said in a note.
New economic data have increased uncertainty about the recovery’s strength and the potential harm of a rate hike, he said.
The U.S. Federal Reserve thought the economy was close to warranting an interest rate hike in September but policymakers wanted firmer evidence a global economic slowdown was not knocking America off course. Employment gains for the previous two months were also trimmed by a combined 59,000.
Dudley suggested that other reports on the economy painted a brighter picture. The ISM Manufacturing Index, construction spending, factory orders and capacity utilization all came in below expectations.
Consumer price inflation remained under the Fed’s 2 percent objective due to headwinds from failing energy prices and non-energy import prices. The minutes said that Lacker argued that the current inflation developments were likely to be transitory and a further delay in starting to raise rates “represented a risky departure” from past Fed practices. The decrease was much steeper than the 0.2% drop expected by economists.
The September meeting had been preceded by weeks of speculation over whether the Fed would vote to raise rates.
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Dealers assigned the greatest probability to the Fed’s benchmark for short-term interest rates being in the middle to lower third of its target range immediately after liftoff, had the Fed chose to lift rates. The unanimous agreement was announced Friday in Peru’s capital on the sidelines of the worldwide Monetary Fund’s annual meeting.
