Fed minutes reveal looming interest rate hikes

The minutes did say the Fed had adopted a staff proposal that when the central bank does start raising rates, it will also release an “implementation note” that will describe the specific measures the Fed will employ to achieve its target for its key policy lever, the federal funds rate.

Global macroeconomic headwinds and a domestic slowdown keep pushing back the potential date for the start of a tightening monetary policy cycle.

Following is a translation of the full text of the Bank of Korea’s statement Thursday on its monetary policy decision for July. Voting members of the FOMC have been neutral on the economy but have dashed hints of optimism in previous releases.

While other policymakers have similarly noted that a decline in the long-run neutral real interest could stymie Fed policy goals, few if any have suggested so directly that increased government borrowing could be a solution.

“On both fronts, underlying conditions have deteriorated markedly since the Fed’s mid-June meeting, so the minutes may be largely irrelevant at this point”, he said. The downside of that strategy is that it worked fine when the world was not as connected as it is now.

“Investors should resist the urge to cash in their stock market investments, provided they are still in it for the long term”, Laith Khalaf, a senior analyst at Hargreaves Lansdown, said in a research note this week.

But that unnamed official “expressed a willingness to wait another meeting or two for additional data”, the minutes said.

July 6 (BusinessDesk) – The New Zealand may fall this week as Greece’s vote against adopting harsher austerity measures in return for another bailout stoke volatility in financial markets and adds pressure to the Reserve Bank to cut interest rates more deeply. Secondly, it was followed by a press conference by Fed Chair Janet Yellen. “It would be a positive sign for them to raise rates”. That’s encouraged investors to seek “safe haven” assets such as the greenback, which has also been on the ascendancy on the prospect of looming rate hikes by the Federal Reserve. He not only favors a September rate hike, but he wouldn’t be surprised by a second rate increase before the end of the year.

And while US economic fundamentals look good, much of the forecast for strong growth in coming years depends on the consumer, who hasn’t seen wages or incomes increase, he said.

The global slowdown further complicates the Fed’s promised agenda or rate normalization.

John Briggs, head of strategy at RBS. doesn’t think the Fed minutes should change the previous perception of the market, but does think that Yellen’s talk on the economy Friday might be a market mover. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. At this moment it would have to be Gold and emerging market (EM) currencies.