Fed officials divided on rate hike in the short term – Financial Journal

Isabel Ramos J.

Federal Reserve divided left the door open to a further rise in interest rates this year, although the authorities insisted the need for more evidence about the durability of recovery before you feel the confidence to act.

the central bank officials were divided in July on the urgency to raise rates again, with some members preferring to wait because inflation remains benign and others wanting to act soon because the labor market approaches full employment, as showed the minutes of the monetary policy meeting on 26 and 27 July that reported yesterday.

Despite to the open market committee left the benchmark interest rate unchanged in a range between 0.25% and 0.5%, two participants wanted to act immediately, while others said that an increase will be “guaranteed soon.” Some “saw recent economic developments as indications that labor market conditions are, or are close to being consistent with maximum employment and hope that the recent progress in achieving the inflation target committee continue” even if they rise types, reflected the minutes.

However, several participants preferred caution, arguing that it is likely that the committee “have enough time to react if inflation rises faster than anticipated at present time”, the paper text.

yields on Treasuries fell and the dollar lost its gains as the market interpreted that interest rates will remain low for longer.

a series members of the Fed have suggested in public comments that have been made since the last meeting, which probably still appropriate to raise rates at least once this year, with some indicating that there could be an action at the September meeting.

“a few would like to raise rates relatively soon, presumably in September, but most seem content to wait until more evidence of a rebound in economic growth and inflation. This supports our view that the Fed will wait until December before raising the rate to range between 0.5% and 0.75%, “wrote Paul Ashworth, chief US economist at Capital Economics, in a note to clients.

“Obviously, these minutes are already outdated. Since that meeting, GDP growth turned out to be markedly weaker than expected, while payrolls July showed another solid rise.

The markets are now focused on what the president (Fed) Janet Yellen said in his speech at Jackson Hole on August 26, “said Ashworth.

investors assign a 50% probability to a rate increase this year, according to the contract prices federal funds futures

.