Fed’s Lockhart says rate hike path may be “slow” and “halting”

The US dollar index, a measure of the greenback against a basket of currencies, fell from an eight-month high after minutes to the Federal Open Market Committee reaffirmed investors’ expectations for higher interest rates next month.

However, several economists worry that the soft patch is not as shallow as the officials say.

Sentiment for a December hike took firm hold at the Fed’s October 27-28 policy meeting, according to meeting minutes released on Wednesday that showed a solid core of US central bankers poised for liftoff.

Precious metals rose 1 percent on Thursday, rebounding from near six year lows as indications from the U.S. Federal Reserve that it may move cautiously into the rate hiking cycle weighed on the dollar and prompted investors to cover short positions.

“In reality, the economy is performing more than well enough to cope with a small rate increase from the current record low levels and it’s good to see that the market is moving on from the hysteria surrounding it. The path of rate hikes is far more important than the first”, Erlam added.

For the first time since 2006, a majority of Federal Reserve officials said they expected to raise interest rates this year, with a shift that would “remove policy accommodation gradually”.

“The pace of increases may be somewhat slow and possibly more halting than historic episodes of rising rates”, Lockhart said.

That message was underscored when policy makers inserted a reference to the “next meeting” on December 15-16 in their October statement, in connection with their assessment on when to act. CHINA RATE CUTS: On Thursday, the People’s Bank of China cut interest rates on loans by small lenders.

A stronger dollar contributed to already plunging commodity prices and hit US exports. Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ, said comments from Fed officials that raising rates early could limit future rises weighed on the US currency.

Then, in a speech last week, Loretta Mester, president of the Fed’s regional bank in Cleveland, said that she believed the time to hike rates was quickly approaching.

Leaps across Asia meant MSCI’s benchmark emerging market share index was on course for its best day in a month and the 45-country All World equivalent was up for a fourth straight day.

Oil prices rose from three-month lows on short-covering. “For me, a key point regarding inflation is that conditions have not been deteriorating, just hanging below target”, he said. On balance, the data have been encouraging and affirm the economy is growing at a moderate pace.