U.S. investors curb forecast for hike in interest rates

Federal Reserve says it needs more confidence in inflation growth before making move

WASHINGTON— U.S. Federal Reserve officials said last month that while conditions for raising interest rates were approaching, they need more confidence inflation is moving toward their goal, according to meeting minutes that prompted investors to reduce bets for a September liftoff.

Most meeting participants “judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” according to minutes of the July 28-29 Federal Open Market Committee session, released Wednesday in Washington, D.C.

The details come four weeks before the Fed’s September meeting, when most economists forecast the central bank will raise its benchmark interest rate for the first time since 2006. Policy-makers say a decision to raise rates will hinge on continued improvement in the labour market and confidence that inflation will move higher.

“Almost all members” indicated that “they would need to see more evidence that economic growth was sufficiently strong and labour markets conditions had firmed enough for them to feel reasonably confident that inflation would return to the committee’s longer-run objective over the medium term,” the minutes show.

“My immediate reaction is that it should reduce the probability of a September rate hike a little bit,” said Guy LeBas, managing director at Janney Montgomery Scott in Philadelphia.

“The biggest point to me is that there’s no evidence of confidence of rising inflation.”