Federal Reserve policymakers agree that more economic data is needed before raising interest rates, although some see a need to tighten policy soon, according to the minutes from the US central bank’s July 26-27 policy meeting.
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New York Fed President William Dudley said that as the USA labor market tightens and as evidence of rising wages builds, “we’re edging closer toward the point in time where it will be appropriate I think to raise interest rates further”.
“For the first time in quite a while, gains in middle-wage jobs actually outnumber gains in higher- and lower-wage jobs nationwide”, said Dudley, a permanent voter on United States interest rate policy and a close ally of Fed Chair Janet Yellen.
The Fed kept policy rates unchanged at the fifth consecutive monetary policy meet in July amid concerns over the fallout of the Brexit vote while fluctuations in labour market data clouded economic outlook.
Traders assign roughly coin-flip odds to a Fed hike by year-end, according to futures prices compiled by Bloomberg.
The minutes stated that the Brexit did not appear to pose a threat to the US economy in the near term and that recent, positive GDP and jobs numbers “provided some reassurance that a sharp slowdown in employment and economic activity was not underway”. The euro traded at $1.1301, near Tuesday’s seven-week high of $1.1323. But policymakers believing a slowdown in the future pace of hiring would argue against a near-term hike outnumbered those who anticipated economic conditions would soon warrant tightening.
Dudley said that a rate hike as soon as September is possible. United Kingdom retail sales data due at 0830 GMT is expected to show a 0.2 percent rise in July after a sharp fall in June.
The greenback felt the sting of lower US Treasury yields, which fell overnight following the release of the Fed minutes.
“The less-hawkish-than-expected minutes are leading investors to pare some of their curve-flattening positions, which pushed the curve steeper right after the minutes’ release”, Goldberg of TD Securities said. The Standard & Poor’s 500 index gained 4.07 points, or 0.2 percent, to 2,182.22 after falling as much as 10 points early on.
Against the Japanese currency, the dollar edged up about 0.1 per cent to 119.55 yen today (May 1, 1015).
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The Fed last raised its benchmark funds rate, the rate it charges other banks on overnight loans, last December – from near zero to a range between 0.25 and 0.5 percent.
