However, not all members were completely set on an increase as some said not all the information needed on the United States economic recovery would be available by December, and questioned whether the USA economy was strong enough to withstand a raise given the Fed’s limited monetary firepower, according to the FT.
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Fed officials also indicated that the pace of tightening will be gradual.
Delaying an increase “could increase uncertainty in financial markets and unduly magnify the perceived importance of the beginning of the policy normalization process”, the minutes said.
Oil prices came off three-month lows as short-covering lifted a market initially suppressed by worries about a global supply glut.
Most Fed officials say they think the economy will be ready for higher rates by year’s end, the Fed revealed on Wednesday in an official account of its October policy-making meeting.
Finally, the primary dealer economists said the Fed was not likely to begin to shrink its $4.5 trillion balance sheet until the fourth quarter of 2016 for the mortgage-backed bonds, and not until the first quarter of 2017 for Treasury bonds. “It squarely puts it in December, and that it’s going to be slow after that”.
The minutes showed that Fed officials debated whether to insert the “next meeting” phrase into the statement.
The committee meets eight times a year, about every six weeks.
Traders added holdings of Eurodollar and federal funds futures for delivery in late 2016 into 2017 following the release of the minutes of the October 26-27 meeting of the Federal Open Market Committee, the US central bank’s policy-setting group.
The Fed has expressed concern about persistently low inflation and said it must be reasonably confident inflation will return to the Fed’s 2% goal in the medium-term before hoisting rates. But in this case investors seem to believe the Fed maintained that low interest rate policy too long. Beijing has cut its benchmark lending rate six times since last November as economic growth slowed. Several fretted that it was uncertain whether the weakness was a blip or the sign of a more sustained slump.
Some officials warned that a global downturn could cause “a potential loss of momentum in the economy and the associated possibility that inflation might fail to increase as expected”.
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But economic reports since the Fed meeting have been encouraging, as employers added a blockbuster 271,000 jobs in October and the unemployment rate dipped to a near-normal 5%. This could lead to a hike in interest rate, which had been down to nearly zero since 2008.
