They point to a vigorous debate within the Fed over a number of key data points including inflation and the timing of a hike. Many think the Fed will move at the September 16-17 meeting, but others argue the central bank will wait until December.
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ANALYST VIEW: “The Fed appears to be heading towards a rate hike and this against the backdrop of deflationary forces globally is creating intense uncertainty”, Shane Oliver, head of investment and chief economist at AMP Capital, said in a commentary.
Bullion’s risen every day this week, gaining to the highest in more than a month, after Fed policy makers signaled concern over low inflation, prompting investors to scale back bets that rates will rise next month. The central bank is eyeing employment and inflation as it considers its first tightening of monetary policy since the crisis.
The latest FOMC minutes show that the Federal Reserve is cautious about raising interest rates.
“Members generally agreed that additional information on the outlook would be necessary before deciding to implement an increase in the target range”, the minutes said.
On China, Fed officials believed that a big drop in the Chinese stock market would have only limited implications for growth prospects in the world’s second-largest economy. But “several participants noted that a material slowdown in Chinese economic activity could pose risks to the U.S. economic outlook”.
While many investors have been anxious about the debt crisis in Greece and China’s downturn, Yardeni doesn’t seem too concerned about those issues. They also noted that Latin American economies – major U.S. trade partners – have also slowed down this summer.
United States dollars lost ground broadly after the July minutes highlighted that the Fed is still in data dependent mode (watching the still weak US inflation), dashing hopes for more explicit hints about imminent rate hike.
Stocks recovered some of their losses after the release of the Fed minutes, but the modest recovery quickly dissipated.
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The dollar’s broad decline underpinned commodity currencies like the Canadian and Australian dollars, which had come under pressure earlier as oil prices plumbed fresh 6-1/2 year lows and persistent worries about ‘s economy sapped confidence. Gold futures for December delivery on the Comex division of the New York Mercantile Exchange rose to an intraday peak of 1,141.80 a troy ounce, the strongest level since July 17, before trading at 1,137.70 during European morning hours, up 9.80, or 0.87%.
