“If the meeting were today, I think the economic data would justify a serious discussion” of whether to raise rates now, he said, adding two rate hikes in 2016 is “conceivable”.
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The dollar edged away from 7-week lows against the yen and euro on Wednesday following hawkish comments from the Fed officials.
As June’s shock United Kingdom vote to leave the European Union fades with little lasting effect on markets, the US economy is bouncing back from a meagre 1.0 percent growth rate in the first six months of the year.
European markets are poised for slight gains, with financial spreadbetter CMC Markets predicting Britain’s FTSE 100 and France’s CAC 40 will open up about 0.1 percent higher, and Germany’s DAX will start the day little changed.
Stock futures point to a higher open Wednesday as investors brace for United Kingdom jobless data and minutes of the Fed’s July policy meeting, due later in the day.
New York Fed President William Dudley’s statement seemed at odds with data released on the United States economy Tuesday that showed consumer prices were unchanged in July as the cost of gasoline fell for the first time in five months and underlying inflation slowed.
Yet markets still only half believe their comments, remembering that the Fed ended up keeping rates on hold in June even after Fed officials talked up the possibility of rate hike in preceding weeks.
This suggested that traders saw a 55 percent chance for the Fed to raise rates in December, up from 42 percent on Monday.
Chinese stocks pulled back from seven-month highs following a sharp fall in bank shares, and Japan’s Nikkei fell 1.62 per cent to its lowest in just over a week as the yen firmed.
Yields on two-year notes briefly touched a near three-week high of 0.758 percent, but failed to reach the July peak of 0.778 percent, and were last at 0.750 percent. It was last trading at 94.96, down 0.8 percent on the week.
“The Fed should reiterate their data dependency, that in the uncertainty they would want to see inflation and wage targets … given that the data has been lukewarm, apart from the July jobs data, December now seems the only opportunity for this year”, Societe Generale analyst Robin Bhar said. Against the euro, it strengthened to 86.51 pence per euro after having hit a three-year low of 87.245 pence on Tuesday. Employment surged in June and July, while on Tuesday data showed solid gains in industrial output and home building in the world’s largest economy.
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The pound is bracing for United Kingdom jobless data later in the day. Brent crude futures were trading at $48.92 per barrel, down 31 cents from their last settlement.
