Traders see about a 40 percent chance the Fed will hike in December, and give about even odds for the January meeting.
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James Bullard’s remarks show a division of opinion at the USA central bank about how to tackle a delicate issue of its first rate hike in nearly a decade.
Among these risks is the possibility that shifting expectations concerning US interest rates could lead to more volatility in financial markets and the value of the dollar, intensifying spillovers to other economies, including emerging market economies.
Weak Chinese data on Wednesday added to global growth concerns, another factor investors believe could deter the Fed from hiking rates this year.
“We are going to have extremely accommodative policy for two to three years”, assuming a gradual increase in the federal funds rate towards more normal levels, Bullard said.
Atlanta Fed President Dennis Lockhart, Chicago Fed President Charles Evans and Fed Board Governor Lael Brainard are scheduled to speak on Monday. “So the beginning of normalization of interest rates I think is quite justifiable in the context of continuing progress of multiple measures of employment”.
Tarullo also appeared skeptical of the idea that further job growth will push inflation up toward the Fed’s 2 percent target.
On Tuesday, Fed Governor Daniel Tarullo said that it wouldn’t be “appropriate” to raise rates this year, sowing additional doubts about how the senior ranks of the central bank view the prospect of tighter monetary policy this year. Last week’s published FOMC minutes show that an interest rate hike in combination with China’s economic slowdown was considered a risk to U.S. macroeconomic growth and inflation (an even stronger United States dollar would weaken USA export performance).
Silver for September delivery rose 4.6 cents, or 0.29 percent, to close at $15.864 per ounce, while platinum for October delivery added $14.5, or 1.48 percent, to close at $995.90 per ounce.
Jeffrey Lacker, the chief of the Richmond Fed, was the lone voice that maintained that a rate hike should have occurred in September.
The survey forecast the personal consumption expenditures price index, excluding food and energy, averaging 1.3 percent this year and 1.7 percent in 2016.
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“We are expecting more dollar weakness”, said Howie Lee, analyst at Phillip Futures Ltd. “It also looks like there is a bump up in [gold] demand from China because of concerns about the stock market”.
