Several Fed officials have hinted in recent days that a rate hike is likely at some point this fall. “They’re afraid of tipping it into recession”, said Levine.
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The FOMC also said that “labor market conditions generally improved in June and that growth in real gross domestic product (GDP) was moderate in the second quarter”.
The FOMC has left rates unchanged since voting in December to raise them from near-zero levels, marking the first increase in almost a decade. Thursday’s data on new unemployment claims and Mid-Atlantic business activity from the Philadelphia Fed supported the notion of a continued economic expansion but not one that is strong enough to handle a steady string of rate increases, analysts and investors said.
He pointed to gains in both the labor market and wages as critical factors which could prompt policymakers to move in the direction of a rate hike.
In addition, some officials pointed to the tepid rate of economic expansion as another reason to remain on hold. Kansas City Fed President Esther George dissented from the group vote in July, favoring an immediate increase.
Earlier this week, it fell to a one-month low of $US4,750.50 after weak economic data raised doubts about the strength of demand in China, which accounts for almost half of global consumption estimated at 22 million tonnes this year.
Currency markets are more concerned that the US economic growth is weakening after recent economic data releases painted a weak outlook.
“[The minutes were] broadly consistent with the message we got with the [July] statement, which is that, by acknowledging that near-term risks have diminished, it was an ever-so-slight and incremental step towards signalling a rate hike at some point”.
However, the committee “recognized that progress on the inflation front has been very slow, and a number of members prefer to see clearer evidence that inflation is moving closer to the 2 percent inflation objective before raising rates again”.
Although near-term concerns associated with the United Kingdom’s vote to leave the European Union had dwindled, officials mentioned other threats that needed to be closely monitored, including the possibility that growth in the United Kingdom and the European Union could be slower than expected.
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“They’ve been trying to talk investors into believing that they’re ready to raise rates”, Chris Gaffney, president of EverBank World Markets in St. Louis, said in a telephone interview. On Wednesday, it reached a three-week peak of 0.774 percent shortly before the release of the FOMC minutes. After lift-off from near zero in December, officials have twice cut their projections for the path of rates this year, as improving USA economic data contrast with signs of slowing growth overseas.
