The minutes came a day after New York Fed President William Dudley said “it’s possible” to raise rates at the September 20-21 policy meeting and Atlanta Fed President Dennis Lockhart said a hike next month is in play. Officials at the central bank felt near-term risks to the US economy have diminished as job growth recovered and said another boost in interest rates might be warranted soon.
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At least one of the committee’s 10 members who were present believed that a hike should have occurred immediately.
The report contained no explicit reference to the timing of the next potential interest-rate increase, beyond noting that a “couple” of officials were advocating for one in July.
WAITING FOR MINUTES: The Federal Reserve released the minutes from its late July meeting.
“Some. members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation”, the Fed said in the minutes.
But a key factor holding the Fed officials back was the stubbornly slow rate of inflation, which has been running below the central bank’s 2 percent target for more than four years, according to the minutes.
The July meeting minutes released on Wednesday showed that Fed policymakers were generally upbeat about the United States economic outlook and labour market.
“The Fed is inching closer to a rate hike, but it likely isn’t there yet”, said Sal Guatieri, senior economist at BMO Economics.
Most of the Fed Officials agreed that the strong jobs market and better than expected market reaction to the United Kingdom referendum some has urged caution citing low inflation. If Ms. George still remains the only dissenter it would be considered very dovish, even if the Fed goes for a hike in December.
“Several suggested that the committee would likely have ample time to react if inflation rose more quickly than they now anticipated, and they preferred to defer another increase in the federal funds rate until they were more confident that inflation was moving closer to 2 per cent on a sustained basis”, according to the records of the policy meeting, released in Washington. But in recent months, turbulence in financial markets and concerns about China and weakening global growth have persuaded the Fed to keep rates on hold.
Traders were reassured that a more robust jobs market, less-than-dire results from the Brexit and other factors were going to help keep the USA economy above water.
Investors expect more insight on the rate outlook at an annual meeting of central bankers from around the world in Jackson Hole, Wyoming, next week.
The Fed raised rates in December for the first time in almost a decade, but it has since kept rates unchanged amid financial market volatility, a global growth slowdown and tame US inflation.
Some Fed officials also anxious that a prolonged period of very low rates could cause investors to misallocate investments or misprice risk, possibly leading to a destabilizing financial bubble and bust.
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The minutes expanded on those views to show that some policy makers saw developments including the UK’s vote to leave the European Union as imparting longer-term uncertainty about the outlook for global growth.
