Asian shares stepped back from a one-year high on Wednesday (Aug 17) after the influential New York Federal Reserve Bank president said the Fed could raise interest rates as soon as September, prompting investors to pause after rallies in recent weeks.
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He said further direction is likely to come from the minutes of the Federal Open Market Committee’s July policy meeting, due for release Wednesday at 2 p.m. ET.
The danger in the latter scenario is the Fed loses control of long-term interest rates while they intermittently tinker with short-term rates, he said. On Tuesday the Federal Reserve said U.S. factories cranked out more cars, machinery and chemicals in July, which suggests manufacturers might be recovering, though growth remains little changed from a year ago and manufacturers are not adding many jobs.
Platinum (XPT=), which hit a near three-week low of $1,105.50 earlier in the session, rebounded 0.7 percent at $1,114.99.
Dealers said some of the weaker dollar trades that dominated the past week had been blown out by New York Fed chief William Dudley.
Analyst Norman Levine said the market’s non-reaction to the Fed minutes confirms that not much was expected out of the release.
By the July meeting, those fears had eased and upbeat language in the Fed’s policy statement appeared to open the door to a rate hike as early as September.
The 0.1% climb in the core Consumer Price Index included drops in the prices for used cars and airfare, and set the stage for trailing 12-month inflation, measured by the core personal consumption expenditures index the Fed uses, to soften by a tenth of a point, to 1.5%. “It’s another wait-for-more-data, that’s the message”. The minutes stated that some Fed members “anticipated that economic conditions would soon warrant taking another step in removing policy accommodation”. However, job creation has been up in the two months since, with 292,000 jobs added in June and 255,000 jobs added in July. Market participants are looking for clues about prospects and timing of a future interest-rate rises. Benchmark U.S. crude added 84 cents, or 1.8%, to 46.58 dollars per barrel in NY.
The Dow Jones industrial average rose 21.92 points, or 0.1 percent, to 18,573.94.
Atlanta Federal Reserve Bank President Dennis Lockhart, seen as centrist, concurred saying he did not rule out a September hike – something markets have nearly completely priced out.
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But the minutes indicated that a rate hike will be on the table at the Fed’s next monetary policy gathering September 20-21.
