The minutes came a day after New York Fed President William Dudley said “it’s possible” to raise rates at the september 20-21 policy meeting and Atlanta Fed President Dennis Lockhart said a hike next month is in play. Dudley said such expectations are, “too low”, and that, “the market is complacent about the need for gradually snugging up short-term interest rates over the next year or so”.
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Analysts said the FOMC minutes have had the biggest impact on the dollar, compared with recent Fed policymakers’ comments.
Fed officials were generally upbeat about the USA economy but some expressed the need to keep their options open in the need of more data pointing to strength, the minutes showed.
Later in the day, three Fed officials – William Dudley, Robert Kaplan and John Williams – are scheduled to speak.
At the July meeting, the Fed kept its benchmark rate in a range of between 0.25% and 0.5%.
Traders see a 20 per cent chance of a rate hike at the Fed’s September meeting, even as Fed Bank of New York President William Dudley said strong jobs gains reinforced his view that wages are starting to move higher.
In December past year, the Fed raised its benchmark lending rate from a record low near zero, where it had stood since the depths of the 2008 financial crisis.
Dudley’s comments also pulled the dollar from seven-week lows hit just after tame USA inflation data.
Market participants interpreted the minutes as moderately positive for risk-taking appetite, with the Fed remaining divided on the timing of the next rate hike.
The Fed’s minutes from its July 26-27 meeting revealed a subtle shift in the central bank’s stance indicating a hike in short-term interest rates is increasingly likely.
“They saw little evidence that inflation was responding much to higher levels of resource utilization and suggested that the natural rate of unemployment, and the responsiveness of inflation to labor market conditions, may be lower than most current estimates”.
Fed will keep an open mind: No, not an open mind for lowering interest rates, but for raising them.
Although the risks toward the U.K.’s vote to leave the European Union, known as the Brexit, seemed a lesser concern for the Fed, the FOMC said it would continue to “closely monitor economic and financial developments overseas”.
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In addition to lingering problems in Europe, some officials noted weakness in other parts of the global economy, including uncertainties over China’s currency policies and the growth in Chinese debt.
