A US interest rate hike is ’”approaching”, but signs of a September hike appear less likely, the latest minutes from the meeting of the Federal Reserve show.
The minutes of the Federal Open Market Committee show that inflation appears to be the main sticking point on any rate move, with current inflation well below the 2 per cent target, thanks to lower oil and energy prices.
“Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” say the minutes.
The group said data received since the last meeting in June showed “economic activity had been expanding moderately in recent months”.
In particular, the committee highlighted unemployment, which it said had ”improved notably since early this year, but many saw scope for some further improvement”.
“Nonetheless, for the second quarter as a whole, mining output contracted sharply and manufacturing production rose only modestly; both sectors were weak over the first half of the year, likely reflecting the continuing effects of earlier increases in the foreign exchange value of the dollar and lower crude oil prices,” say the minutes.
However, committee members were divided on their outlook for inflation.
“Some … participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to 2 per cent over the medium term and that the inflation outlook thus might not soon meet one of the conditions established by the Committee for initiating a firming of policy,” say the minutes.