US Federal Reserve minutes contain hawkish undertones

 
Jessica Morris
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Federal Reserve Lowers Key Rate By Three Quarters Of A Point
Federal Reserve Bank of Kansas city president Esther George voted to hike interest rates (Source: Getty)

The minutes from the US Federal Reserve's meeting on 26-27 July showed growing support for an interest rate rise.

An unnamed individual agreed with the Federal Open Market Committee member who voted to increase borrowing costs at the meeting.

"Given their economic outlook, they judged that another increase in the federal funds rate was or would soon be warranted, with a couple of them advocating an increase in this meeting," the minutes said.

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"A few participants pointed out that various benchmarks for assessing the appropriate stance of monetary policy supported taking another step in removing policy accommodation."

The release sent US stocks higher, while the dollar fell.

The FOMC had left the interest rate unchanged at its meeting in July, however it tantalised hawks by saying that risks to the outlook had diminished since July.

The minutes showed that the Fed was encouraged by a rebound in jobs growth and how quickly the markets recovered post-Brexit vote. But they remained concerned that the rate of inflation continues to miss its two per cent target.

"Negative sentiment surrounding the Brexit outcome early in the inter-meeting period was subsequently alleviated by expectations for greater policy accommodation ... some resolution of near-term political uncertainty in the UK, and positive US economic data releases," the minutes said.

"Nevertheless, several longer-term global risks related to Brexit remained," it added.

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Federal Reserve Bank of Kansas city president Esther George had resumed her call for a rate hike at the FOMC meeting in June.

"I view the economy as at or near full employment and inflation is close to the FOMC's target and yet short-term interest rates remains near historic levels," she said in a speech made about two weeks after the meeting.

"Just as moving interest rates too quickly can slow the economy, we should not lose sight of the fact that keeping rates too low for too long can also create risks."

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