Gold Stuck Near 8-week Lows After Fed Minutes
- Author: Jon Douglas Jul 06, 2017,
Jul 06, 2017, 0:09
Members "expressed a range of views" about the right timing of such cuts, with several preferring to "announce a start to the process within a couple of months", the minutes said.
Inflation indicators will play an important role over the next few months, especially as recent data has been softer than expected. The Fed also seemed confident that inflation will recover after recent soft readings. The minutes noted, however, that "several participants expressed concern that progress toward the committee's 2 percent longer-run inflation objective might have slowed and that the recent softness in inflation might persist".
The minutes also showed central bankers divided over precisely when to begin reducing the Fed's massive balance sheet, a task that they have indicated they will begin before the end of the year. Analysts are watching for another increase in the federal funds rate in September, followed by another hike at the December meeting.
The strengthening job market left majority comfortable with raising a key short-term rate last month.
"The information reviewed for the June 13-14 meeting showed that labor market conditions continued to strengthen in recent months and suggested that real gross domestic product (GDP) was expanding at a faster pace in the second quarter than in the first quarter", the minutes read.
In their forecasts, Fed officials have signaled another small rate increase is coming this year, and three more are expected in 2018 until the rate reaches about 2.1%.
US stock prices were up slightly at the close of trade while yields on USA government debt dipped. Those figures would rise in increments over a year until they reached $30 billion a month in Treasurys and $20 billion in mortgage bonds. With the United States economic picture beginning to show cracks, there is reason to believe a September rate hike may not be advisable.
As of Wednesday afternoon, markets were projecting a 97 percent chance that the Fed would remain on hold when it meets again in July.
After the June meeting, Yellen said the plan would lead to "a gradual and largely predictable decline" in the assets.
Financial conditions were also debated at the meeting, with some participants arguing that "increased risk tolerance" among investors could be lifting asset prices.
USA central bankers are divided over the near-term risk of inflation and disagree over the timing of interest rate hikes into next year, minutes of the last Federal Reserve meeting showed Wednesday.
Some members of the Federal Open Market Committee, which sets the benchmark USA interest rate, also expressed concern that Wall Street stocks were overvalued.