Fed Chair Janet Yellen told reporters at a news conference following the meeting that a rate hike was still likely this year, a prediction she repeated two weeks ago during a speech in Massachusetts. He said that interest rate changes by the Fed, alone, wouldn’t accelerate growth.
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A voting member of the Federal Reserve’s policy committee said Friday that he still thinks an interest-rate increase will be appropriate by year’s end.
In addition, he said raising rates prematurely could create a situation in which the Fed would have to lower rates again if the central bank is found to have “misjudged the strength of the economy or the upward tilt in inflation”.
According to the minutes, policymakers thought it was more prudent to wait for evidence that the economy had not deteriorated and that inflation would gradually move back toward towards the 2% annual target.
Spot gold was up 1.6 percent at $1,156.70 an ounce at 2:44 p.m. EDT (1844 GMT), after touching a peak of $1,159.80, its highest since August 24.
“But it’s a forecast, and we’re going to get a lot of data between now and December”.
Brent crude oil was on track for its biggest weekly rise since March 2009, while zinc soared 9 percent – its biggest daily gain for seven years – after troubled mining giant Glencore said it would cut production. The latest spark came from last week’s jobs report which in the eyes of many, appears to have been the final nail in the coffin for a rate hike this year, although that is debatable.
The dollar fell to one-week lows against the euro and yen on Thursday as investors grew cautious about the impending release of minutes of last month’s US Federal Reserve meeting, which could shed more light on the central bank’s somber outlook on growth and interest rates.
Dudley said “it’s possible” that the Fed could begin hiking later this month, though he questioned whether data between now and then would give it confidence. This has introduced further market uncertainty about whether the US economy has fundamentally slipped down a gear amidst slow global growth and a strengthening dollar. He also mentioned that “there is no problem in moderately overshooting” the Fed’s inflation goal, rather than undershooting it as they have in recent months.
“I hope to avoid the trap of letting one or two months’ specific data overly influence my outlook for the economy overall”, he said.
“We need to be confident that over the course of time, a couple of years, inflation will return to the 2 percent target”, Fischer said.
The Fed was uncertain if there was sufficient economic data on a wider scope to back up an increase in the interest rate.
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However, he added that although Asian currencies “benefit from a delay in Fed?s policy normalisation, you can’t escape the fact that China’s economic performance is still very sub-par”.
