FOMC minutes: Divergence about when to raise rates

The minutes from the latest FOMC meeting showed that members were split in July on whether a rate hike soon was needed or not. At that meeting, the Federal Reserve kept interest rates unchanged but left the door open to lifting rates later during 2016.

The minutes provided evidence of a division among officials about the timing of the next rate hike. According to the document “members generally agreed that, before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labor market and economic activity.”

“A couple of members preferred” to wait for more evidence that the CPI would rise to a 2% on a sustained basis. “Some other members anticipated that economic conditions would soon warrant” a rate hike. As the FOMC vote of the July meeting showed, one member, Esther L. George, voted to raise rates, based on “easing of financial conditions since the U.K. referendum, the return to trend economic growth, solid job growth, and inflation moving toward 2 percent.”

Members of the Committee emphasized that the path of the interest rate would depend on the economic outlook as informed by incoming data. “In that regard, members judged it appropriate to continue to leave their policy options open and maintain the flexibility to adjust the stance of policy based on incoming information and its implications for the Committee's assessment of the outlook for economic activity, the labor market, and inflation, as well as the risks to the outlook.”

The next meeting of the FOMC will be on September 21. Next week, Janet Yellen will speak at the important Jackson Hole symposium.

Greenback weakened after the minutes. Immediately after the released printed fresh highs in the market but quickly turned to the downside, approaching yesterday’s lows. Stocks in Wall Street edged higher.