Fed interest rate hike may come ‘soon’
But policymakers still divided on whether economy could bear it
Investors locked on one word from the Federal Reserve’s minutes released Wednesday: “soon.”
The Fed’s minutes from its July meeting revealed a subtle shift in the central bank’s stance, indicating a hike in short-term interest rates is increasingly likely. “They (members of Federal Open Market Committee) judged that another increase in the fed- eral funds rate was or would soon be warranted,” according to the notes. If the Fed were to make a move in its upcoming September meeting, that would be its first hike to short-term interest rates this year.
Stocks were stable after the news as investors focused on the Fed’s increased faith in the strength of the economy but also the fact that the Fed still seems torn.
“After two months of surprisingly strong job gains, there had been signals from some Fed members that a rate hike was inevitable by September, but the minutes confirm that the majority of the members of the FOMC are willing to wait for more data to confirm the health of the labor market and the overall economy before raising rates,” says Tara Sinclair, chief economist at job site Indeed.com and economics professor at George Washington University.
Fed officials still appear to be largely divided on whether the economy is strong enough to warrant a rate hike, though. Recent economic strength, most notably the jobs report in July, has added fuel to the growing suspicion the Fed could move to slow things down. During July, employers added 255,000 jobs, a strong showing for the second consecutive month. Inflation continues to be tame, too. The Labor Department’s inflation reading for July showed prices remained flat, thanks in part to lower gas prices.
Most traders don’t think the Fed will move at its Sept. 20 meeting.