Is an interest rate hike overdue?

Staff outlined how the Fed had potentially fallen behind in communicating its intentions, with markets pushing expectations of an initial rate hike into next year. “Slow just says we’re following economic conditions”, Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey, said by phone.

Meanwhile, US housing starts dropped to the lowest level in seven months in October, while a surge in building permits signalled the housing market remained on firm footing.

However, the Fed minutes indicated that officials felt the United States had come through these difficulties.

The kiwi headed for its biggest advance this month and the Aussie rose as investors sought out the highest-yielding assets. Australia’s main index jumped 1.4%, aiming for a third consecutive session of gains.

Against the yen, the dollar fell about 0.3 per cent to 123.25 yen, down from a three-month peak of 123.77 yen scaled after the Fed minutes. Against the greenback, the Australian dollar rose to 1.3944 from 1.4064; and the baht climbed to 35.879 from 35.985.

US bond markets were impressed by a clear sign that a majority at the Fed think a rate rise in December may now be “appropriate”, sending USA short-term interest rates higher. “Given what the Fed said in the minutes, it doesn’t look as if there is a lot of money to be made at this point by having a very long dollar exposure”.

Government data today showed New Zealand producer prices rose in the September quarter, with output prices increasing at a slower pace than input prices as manufacturers were hit by higher import costs from a weaker currency.

Fischer noted that the question lingers of whether Asia and emerging markets are prepared for policy tightening by global central banks.

But some other members said it is unlikely that economic data received by the December meeting would warrant a rate increase, raising the prospect of several dissents if the Fed decides to take action then.

A delay could also be interpreted as lack of confidence of the Fed officials in the economy.

Some officials warned that a global downturn could cause “a potential loss of momentum in the economy and the associated possibility that inflation might fail to increase as expected”.

However, the minutes also pointed to a debate among Fed policymakers about the USA economic outlook, which may have affected sentiment about an impending rate hike in December, some analysts said.

“The pace of the rise is what s much more important than the rate rise itself”, Angus Gluskie, a managing director at White Funds Management in Sydney, told Bloomberg News.