Fed July Minutes, Divided FOMC Waiting for Further Data
Still more from Fed's Williams: September rate hike should definitely be in play
Williams with more (from more Q&A)
- Says he is not in a hurry to raise rates, but should not let economy overheat
- Says the view that Fed is on hold for next year not consistent with economic outlook
- September rate hike should definitely be in play
- Says he is okay with uncertainty over exactly when Fed will raise rates
- Says rate hike decisions now should be based on current Fed strategy and goals
- Remarks earlier this week on rethinking Fed strategy focused on longer-term framework
Headlines via Reuters
Who does he think he is fooling on the "September in play" comment?
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In the minutes from July’s Federal Reserve Open Market Committee (FOMC) meeting, the main message was one of a divided committee. Fed officials were split on whether there would need to be a rate increase soon with a majority suggesting that further data was needed before deciding to increase rates again. The key question now is whether incoming data has persuaded enough members that the economic conditions have been met and Yellen’s forthcoming comments will be watched very closely.
Essentially, the argument was whether the Fed should be proactive in acting to raise rates soon to lessen the future risks or whether it could afford to be more reactive and wait for further evidence.
Members overall agreed that before taking another step in removing policy accommodation it was prudent to accumulate more data in order to gauge underlying momentum in the labour market and economic activity. Voting members in particular were content to wait for further evidence. Several member stated that the Fed would have ample time to react if inflation rose more quickly than expected.
Several policymakers, however, were concerned that low interest rates would pose a risk to financial stability with greater concerns within the non-voting members.
Some other participants also stated that economic developments indicated that the labour market was close to full employment and that inflation would gradually rise to the 2% target even with a further limited reduction in monetary accommodation.
Members saw developments since the June meeting as reducing near-term uncertainty along two dimensions. There was greater confidence in the labour market with the June data and higher participation rate suggesting that conditions remained solid and that slack had continued to diminish.
The quick recovery of financial markets after the UK referendum leave vote was an encouraging sign of resilience, but the UK vote, along with other overseas developments still imparted considerable uncertainty.
There was still a split of opinion surrounding the labour market with a couple of members suggesting that a slower rate of employment growth was to be expected given the tight labour market while several others expressed concern over the risk of a further slowdown in employment growth.
source