Federal Reserve officials believed last month that near-term risks to the USA economy had subsided and that an interest rate increase could soon be warranted.
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At its July meeting, the Fed opted to hold rates between 0.25% and 0.5%.
The minutes showed that members of the US central bank’s rate-setting Federal Open Market Committee were generally upbeat about the USA economic outlook and labor market, but several said a slowdown in the future pace of hiring would argue against a near-term hike.
The minutes from the Fed’s July meeting, published on Wednesday, show some Fed leaders see an opportunity for a rate hike this year.
“Given their economic outlook, they judged that another increase in the federal funds rate was or would soon be warranted, with a couple of them advocating an increase at this meeting”, according to the minutes.
The dollar was slightly stronger in major pairings, showing a little support from the market after William Dudley, head of the Fed’s NY branch, said a rate hike was possible next month and that Wall Street investors were too “complacent” about the prospect of higher rates.
“I don’t think anything in these minutes supports a quicker rate increase and again, I think that they’re data dependent still”, Chris Gaffney, president of Everbank World Markets in St Louis, told Reuters.
The Fed’s July decision to leave rates alone was backed by a 9-1 vote.
Although some economists say they think the Fed will be ready to raise rates next month, most have said they think the policy-makers will take no action before December.
The optimistic chatter is a shift from the Fed’s messages earlier this year. Many experts took that to mean the Fed wouldn’t raise rates anytime soon.
Not all Fed leaders are so optimistic.
But Investors, who had counted out any chance of a Fed rate hike this year, are putting more money on Dudley and Lockhart.
However, in recent months, turbulence in financial markets and concerns about China and weakening global growth have persuaded the Fed to keep rates on hold.
Still, even one rate hike this year would be be much lower, considering the Fed had projected last December that it would raise rates four times this year.
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Their reasoning were as follows: they want to be sure the job market is strong after a May labor report showed weak numbers, there is no sign of inflation, Brexit could hurt the European economy, and Italian banks could experience a crisis and negatively affect the European banking system, Schatzker said. The Atlanta Fed projects third quarter growth to be 3.6%, which would be well above the 1% growth America averaged in the first half of the year.
