Although agreeing that the economy was nearing a point where rates should move higher, Fed officials in July were anxious that lagging inflation and a weak global economy posed risks too big to commit to a rate “lift-off”.
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Prior to that, the price of gold had started to tumble in the worldwide market in expectation of the US Federal Reserve’s interest rate hike.
Federal Reserve officials say their decisions about interest rates are data dependent, meaning they will move interest rates when economic data support a change.
The report left it unclear whether the Fed will raise rates at the policy meeting on September 16-17, stoking anxiety about the health of the global economy.
Capital Economics chief US economist Paul Ashworth said a dovish market reaction to the minutes was overdone and a September rate hike looks a distinct possibility.
“Almost all members” indicated that “they would need to see more evidence that economic growth was sufficiently strong and labour markets conditions had firmed enough for them to feel reasonably confident that inflation would return to the committee’s longer-run objective over the medium term”, the minutes state. German stocks continued their losses and are facing the worst month in more than three years.
The U.S. dollar opened higher against the Taiwan dollar on follow-through buying from a session earlier, but soon faced downward pressure as investors took hints from the strength of other regional currencies to pick up the local currency, dealers said. The Fed minutes said that this could lead to a further strengthening in the value of the dollar, which could cause further weakness in U.S. exports and drag oil prices even lower. “The problem for the Fed is that there is very little sign of inflation”.
The Shanghai and Shenzhen markets fell more than 5 per cent early on, but both rallied to finish up more than 1.2 per cent as the central bank injected more funds into the financial system for a second day.
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U.S. data showed home resale rose to a near 8-1/2-year high in July while factory activity in the mid-Atlantic region picked up. Palladium gained 0.3 percent to $612.75 per ounce and silver rose 0.3 percent to $15.34. The dollar was down 0.40 percent against the yen at 123.76 yen, and off 0.20 percent against the British pound at $1.5684.
