MSCI’s broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS slid to a two-year low and was last down 0.1 percent. Translation: some Fed officials are ready for liftoff in September.
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A government data released on Tuesday revealed that the U.
“The U.S. CPI release might lead to some stabilisation, but even then the focus might remain more on the near-term developments where commodities continue trading subdued, and an early Fed hike might be feared to turn out as a policy error which could choke off the underlying price momentum”.
“The market will be most interested in where US inflation comes in, because this is something that will determine not just when the Fed begins to normalise policy but also the pace at which they tighten, going forward”, said Barclays FX strategist Hamish Pepper in London. Given the Federal Reserve has been caught by this two week lag where market conditions have changed dramatically from rate announcement to member minutes it could be a matter of time before the Fed borrows from the Old Lady’s best practices.
Inflation data published separately on Wednesday showed price pressures remained stubbornly weak, edging up only 0.1 per cent in July to take annual underlying inflation to 1.8 per cent for the 12 months.
Different members of the committee, who are not identified by name in the minutes, disagreed about how to interpret recent inflation readings, which have shown inflation below the Fed’s 2 percent goal. All it wanted to see was “some further improvement in the labor market” and more confidence that inflation will move back up to its 2% objective. But “several participants noted that a material slowdown in Chinese economic activity could pose risks to the U.S. economic outlook”. Earlier, China’s main Shanghai Composite and Shenzhen 300 indices each lost more than 6 percent as investors bet that demand in China will cool, drag on the trade-reliant economy, and create more doubts about a global recovery. The greater transparency makes it easier for the market to keep track of Chinese gold purchases, which previously were based only on assumptions. The central bank has kept a key rate that it controls at a record low near zero since December 2008.
US Treasury bond yields fell, as interest rate traders bet on the Fed delaying an interest rate rise.
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That decline coincided with futures traders reducing the probability that the Fed will raise rates in September.
