But the market remained somewhat cautious on Friday, taking note that the minutes also revealed most Fed policymakers thought the central bank’s first rate increase in almost a decade should still come in 2015.
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Those minutes from the Fed’s September policy meeting are the main driver in markets as they showed officials worrying over low inflation amid weak commodity prices. Given the erosion in USA rate forecasts and the flagging demand of haven assets – the fundamental pillars that lifted the Dollar to its current elevation – it would seem the ground is about to give way. “That would be the question I would ask”. In hindsight, the Fed had the ideal occasion to hike in the pre-summer months from a fundamental perspective, however, global events and USA data since then do provide a few compelling reasons to be rate hike prudent.
On the data front, import prices fell 0.1% in September, less than the expected 0.5% drop.
The Labor Department reported that the USA economy added 142,000 jobs in September, well short of analysts’ expectations.
Meanwhile, other economic reports did not paint an encouraging picture either.
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”.
“While I have not changed my basic outlook, very recent data have not provided much confirmation that my narrative still holds”, Lockhart said.
“There’s a touch more downside risk today” than there was weeks ago, he says, even though the US economy is expanding at a moderate pace despite “global weakness and elevated market volatility”.
Still, he said, “I continue to feel that cumulative progress is consistent with liftoff relatively soon”. It was noted that monetary policy was better positioned to respond effectively to unanticipated upside inflation surprises than to persistent below-objective inflation, particularly when the federal funds rate was still near its effective lower bound. Many had expected the first hike to occur in September.
US stocks closed higher Thursday as investors digested the Federal Reserve’s latest meeting minutes, which showed the Fed’s policy-making committee was concerned by signs of a global economic slowdown.
The Fed’s action was approved on a 9-1 vote with Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, dissenting.
In his speech Friday, Evans suggested that the risks of waiting longer to raise rates were manageable. But he cautioned, “That view is not immutable and will respond to economic developments over time”.
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One industrial company that did not do well was Alcoa, the aluminum company, which fell 75 cents, or 7 percent, to $10.26.
