Fed policymakers divided over whether to raise rates soon: minutes

Wed Aug 17, 2016 3:01pm EDT
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By Jason Lange and Lindsay Dunsmuir

WASHINGTON (Reuters) - Federal Reserve policymakers agree that more economic data is needed before raising interest rates, although some see a need to tighten policy soon, according to the minutes from the U.S. central bank's July 26-27 policy meeting.

The minutes, which were released on Wednesday, showed that members of the rate-setting Federal Open Market Committee were generally upbeat about the U.S. economic outlook and labor market.

"Some ... members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation," the Fed said in the minutes.

Several Fed policymakers, however, said a slowdown in the future pace of hiring would argue against a near-term hike, and members of the FOMC said they wanted to "leave their policy options open."

The U.S. dollar strengthened after the release of the minutes, while U.S. stocks and prices of shorter-dated U.S. Treasuries pared losses. Fed funds futures showed little change in bets on when the Fed will lift rates, with investors still expecting the next rate increase to likely come in December.

"The minutes contained more concrete indications that a consensus to raise rates is slowly building," said Brian Dolan, head market strategist at Drivewealth in New Jersey.

The Fed raised rates in December for the first time in nearly a decade, but it has since kept rates unchanged amid financial market volatility, a global growth slowdown and tame U.S. inflation.

Investors had raised bets earlier this week for a rate increase this year after two Fed policymakers said the economic stars now appear to be aligning despite weak U.S. growth in the first half of 2016.   Continued...

The Federal Reserve headquarters in Washington September 16 2015. REUTERS/Kevin Lamarque