Japanese shares traded higher, with the Nikkei 225 index up 0.65% and the Topix advancing 0.57%.
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Taken together, the latest Fed release suggested a rate increase is a possibility as early as September, but the Fed won’t commit to moving until a stronger consensus can be reached about the outlook for growth, hiring and inflation.
New York Fed President William Dudley and Atlanta Fed chief Dennis Lockhart both said in public statements that the USA central bank could raise the nation’s short-term interest rates at its September policy meeting. He said near-term risks from the effects on financial markets of the United Kingdom vote in June to leave the European Union had diminished, but added that there were uncertainties about the longer-term economic impact and whether foreign central banks would be able to support global economic growth with negative interest-rate policies.
Investors had raised bets earlier this week for a rate increase this year after two Fed policymakers said the economic stars now appear to be aligning despite weak United States growth in the first half of 2016. The two-year yield, which is sensitive to traders’ views on Fed policy, was down 1 basis point at 0.734 percent after touching a three-week peak at 0.774 percent shortly before the release of the FOMC minutes.
Fed funds rate futures are pricing in a 50 per cent chance of a rate hike by December, a small increase from below 50 per cent earlier this week.
Mr Dudley’s comments also pulled the United States dollar from seven-week lows hit just after tame USA inflation data.
The dollar’s index against a basket of six major currencies plunged to 94.426 on Tuesday, its lowest level since Britain voted to leave the European Union in June.
Continued expectations of low interest rates have helped stocks rise to record highs, with the S&P 500 index notching 10 all-time closing highs so far this year. It was last trading at 94.96, down 0.8 percent on the week. It climbed 0.3 per cent to 76.72 USA cents against the Australian dollar and was little changed at US$1.3040 versus the pound.
The pan-European STOXX 600 was up 0.36 percent.
“As the world economy is slowing down, many countries now need a cheaper currency to support share prices”. Economic shocks in China and the continuing saga of the Brexit vote have put pressure on other central banks to act to avoid the pull of deflation of their economies. It hit a three-week low of $679.72 on Monday.
The pound is bracing for United Kingdom jobless data later in the day. Brent dropped down to $48.85 a barrel, a 0.77 drop after a 1.8 percent increase overnight.
Oil prices at five week high: Oil prices fell away from 5-week highs on Wednesday, as analysts doubted possible producer talks to rein in ballooning oversupply would be successful.
Brent crude futures dropped 0.7% to $48.90 a barrel, while USA crude retreated 0.5% to $46.36.
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Yields on two-year securities rose for a second day after Dudley, who serves as vice chairman of the rate-setting Federal Open Market Committee, said on Fox Business Network that policy makers are “edging closer towards the point in time where it will be appropriate, I think, to raise interest rates further”.
