Inflation has remained below the central bank’s 2% target.
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“The market has been trying to read into whether Fed official comments for a September rate hike will be repeated by Janet Yellen next week, but there is no clarity yet”, Saxo Bank senior manager Ole Hansen said.
The Philly Fed Manufacturing index is expected to rebound to 1.2 points in August, following -2.9 a month before.
Markets have been left confused by mixed messages from the Fed, with hawkish comments from New York Fed President William Dudley and San Francisco Fed President John Williams clashing with the Fed’s July meeting minutes this week saying more data is needed before interest rates can rise.
“If we want to bend the curve” on slow growth, “it’s not going to be through monetary policy”, Mr Williams said. Atlanta Fed President Dennis Lockhart this week said that he was “not prepared to rule out at least one rate hike before year’s end”.
However, as the Fed itself has done repeatedly, he stressed that any policy action would depend on the health of the most recent economic data.
Federal Reserve Bank of Kansas City President Esther George even dissented from her colleagues’ decision to stick with the status quo, voting against kicking the rate hike can down the road.
The last rate hike, the first in almost a decade, was introduced by the Fed last December, but market volatility and a global growth slowdown has meant rates have remained unchanged since then. Also noteworthy was stabilization of the financial markets after a bout of post-Brexit turbulence that had persisted for weeks.
“We might be seeing some profit taking in action”, said Bernard Aw, market strategist at IG in Singapore.
The minutes showed US policymakers were divided as to whether to hike interest rates in the near future, a move that would have hurt gold.
He told reporters that uncertainty about exactly when the Fed will raise rates was acceptable.
But Fed officials also noted the risks of waiting too long.
“The diffusion index for current general activity moved from a negative reading to a marginally positive reading, while the indicators for new orders and employment suggested continued general weakness in business conditions”, the report said.
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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The greenback felt the sting of lower US Treasury yields, which fell overnight following the release of the Fed minutes. But they did not indicate when they would likely raise rates.
