Fed Minutes Suggest Rate Rise Possible as Soon as Next Month Federal Reserve officials sought to keep their options open at a July policy meeting as they tried to reconcile differences on the economic outlook and when to raise rates. The meeting minutes suggested a rate increase is a possibility as early as September.
(…) Several officials, still not yet confident that inflation will rise to the Fed’s 2% objective after running below target for four years, weren’t prepared to consider a rate increase. Others, believing the U.S. is close to a fully recovered job market, thought a rate increase would soon be warranted, according to the minutes. (…)
The Fed next meets Sept. 20-21. (…)
“Participants generally agreed that the prompt recovery of financial markets following the Brexit vote and the pickup in job gains in June had alleviated two key uncertainties about the outlook,” the minutes said. (…)
The central bank divided into three camps at its July meeting, the minutes show: those who aren’t ready to move rates up, those who are ready, and those who say the moment is getting closer. (…)
“By far the most significant part of the minutes was the point, repeated at least twice, that (official) forecasts had changed little during the intermeeting period,” Roberto Perli, an analyst with Cornerstone Macro Advisers, said in a note to clients.
Back in June they all expected to raise rates this year. If none of them changed their forecast in a material way, it must mean they still see a rate hike this year as appropriate, he said. “A move by December was and remains a good base case,” he said.
Some Fed officials also worried that a prolonged period of very low rates could cause investors to misallocate investments or misprice risk, possibly leading to a destabilizing financial bubble and bust.
The Office for National Statistics said Thursday that retail sales rose 1.4% on the month in July and were 5.9% higher than a year earlier. The ONS said sales increased at all categories of stores it monitors, with sales at department stores and clothing outlets leading the gains. Sales of watches and jewelry were 3.1% higher on the month in July and 16.6% higher than a year earlier. (…)
The number of jobless claimants declined by 8,600 in July to 763,600, the Office for National Statistics said Wednesday. The number of vacancies in the job market fell slightly on the month, to 741,000, although there were still more available positions in July than there were a year earlier. The number of people out of work and not looking for a job—those classed as economically inactive—also fell. (…)
Bank of Japan Likely to Take Bold Easing Action, Abe Adviser Says Etsuro Honda said the central bank’s September policy review would support further stimulus to defeat deflation.
“I have hedges on, I’m more hedged than I ever was. [The market] is way overvalued at 20 times the S&P and I’ll tell you why: a lot of it is a result of zero interest rates. That’s going to be hurt. There’s going to be a day of reckoning here. I’ve seen it many times in my life. When things look good, they look great. You go into the sky. But that’s when you have to really pull down and really stop buying.”