Fed close to rate hike

The Sun (Malaysia) - - SUNBIZ -

WASHINGTON: Sev­eral vot­ing Fed­eral Re­serve pol­i­cy­mak­ers judged a rate hike would be war­ranted “rel­a­tively soon” if the US econ­omy con­tin­ued to strengthen but doubts on in­fla­tion re­mained, ac­cord­ing to the min­utes of the Fed’s Septem­ber pol­icy meet­ing re­leased on Wed­nes­day.

The min­utes of the Sept 20-21 meet­ing, at which the US cen­tral bank held rates steady, also showed the depth of divi­sion over tim­ing.

“Sev­eral mem­bers judged that it would be ap­pro­pri­ate to in­crease the tar­get range for the fed­eral funds rate rel­a­tively soon if eco­nomic de­vel­op­ments un­folded about as ... ex­pected,” the Fed said in the min­utes.

Seven­teen pol­i­cy­mak­ers par­tic­i­pated at the Septem­ber meet­ing, of whom 10 had a vote. In the min­utes, both vot­ing mem­bers and the wider group were di­vided on how much more they can al­low the labour mar­ket to strengthen be­fore rais­ing rates.

Some be­lieve that with the US al­ready near full em­ploy­ment, in­fla­tion could rise too quickly if the Fed waits too long.

The min­utes said “it was noted that a rea­son­able ar­gu­ment could be made ei­ther for an in­crease at this meet­ing or for wait­ing for some ad­di­tional in­for­ma­tion on the labour mar­ket and in­fla­tion.”

US stocks rose slightly fol­low­ing the re­lease of the min­utes, while yields on U.S. gov­ern­ment debt pared ear­lier gains.

“They just want a bit more data to be sure. We think they will have those data by the time of the De­cem­ber meet­ing,” said Ian Shep­herd­son, an econ­o­mist at Pan­theon Macroe­co­nomics. – Reuters

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