Fed signals December rate rise

Officials in the minutes stressed that no decision had yet been made. It felt that global threats had “diminished” at the time of the meeting.

However, the greenback retreated on Thursday as prospects of the United States first hike in almost a decade were seen to be factored in. “They re-iterated the gradual pace of future rate moves, and this has led to some profit-taking in the dollar”, senior currency strategist at Rabobank, Jane Foley told CNBC. A couple of officials anxious that it might be signaling too strongly the possibility of a December rate hike.

The October minutes may be seen as a manoeuvre to prime the markets for a rise at the next meeting on 16 December, but it has left policy options open.

In particular, Fed officials said the jobs market is improving and inflation is starting to move towards their 2 per cent annual target.

But European “gains petered out throughout the day after caveated European Central Bank minutes showed officials deliberated increasing stimulus in October but decided that low inflation lasting longer does not necessitate cutting rates or expanding the level of quantitative easing”, markets analyst Jasper Lawler at CMC Markets United Kingdom said. He also said that the slowdown is Asia is likely to have persistent effects on some commodity prices, which have plummeted this year, though the long-term outlook for how the region will affect oil prices is less certain. That there should be more focus on the trajectory rather the timing of the first lift off. “Indeed, the divergence in policies across central banks and financial tightening in the U.S. requires a cautious approach to ensure that the actions do not result in unnecessary tensions”, she said.

Don’t Expect Interest Rates of Yesteryear…

The Fed has kept its benchmark for short-term rates near zero since late 2008.

Bond markets also seemed to have got the message that there was be no post-December rush on rates from the Fed. “Slow just says we’re following economic conditions”, Mark Kepner, an equity trader at Themis Trading LLC in Chatham, New Jersey, said by phone.

“We think that after the lift-off in December, the pace for rate hikes will be slow”.

William C Dudley, the president of the Federal Reserve Bank of NY, who has emphasised the importance of preparing financial markets for liftoff, said on Wednesday before the publication of the minutes that it appeared investors were ready for the Fed to start raising rates.

The USA unit continued to face headwinds from emerging market currencies, with the upbeat Fed outlook providing dealers with confidence to buy risker, higher-yielding assets.