The chances of the Fed raising rates for the second time since the financial crisis next week has been dealt another blow as a key rate-setter said the case for a hike had fallen away.
Lael Brainard, seen as one of the most cautious voices on the rate-setting federal open markets committee (FOMC), said the arguments in favour of raising rates had become "less compelling" citing a number of weaknesses in the global and domestic economies.
Weaker inflation, a greater degree of "slack" in the labour market, "muted recovery in wage growth" and "disinflationary pressure and weak demand from abroad" were all cited by Brainard as reasons to proceed with caution.
Brainard was speaking in front of the Chicago Council on Global Affairs after a day which saw speculation about interest rates trigger a wild day of trading on the money markets.
Stock markets had fallen early this morning after other Fed officials signalled they believed the conditions for an interest rate rise were approaching. The FTSE 100, which closed before Brainard's speech, dropped 1.1 per cent to a six-week low on speculation, with the late announcement of Brainard's intervention raising concern among investors that she would signal the time for a rate rise was moving closer.
Her comments sent the probability of an interest rate rise at next week's Fed meeting down from 19 per cent to 11 per cent, according to futures markets. Today was the final day Fed officials can make public statements before the one-week blackout period before next week's meeting begins.