Federal Reserve Moves Toward Raising Interest Rate for First Time in Years

It said in a note: “We believe demand and supply fundamentals remain solid and expect prices to recover further once markets have digested the first Fed move”.

With the unemployment rate at a seven-year low of 5.3 percent, analysts have been eyeing a rate increase at the September 16-17 meeting.

Shares fell in Asia on Thursday as investors reacted to another plunge in oil prices and the Federal Reserve’s signal that it was open to the possibility of an interest rate hike in September.

“While the Fed seems confident in achieving its employment mandate, it remains unsure about hitting the inflation goal”.

Mr. Lee. said that a rise in U.S. interest rates in next month would hurt the competitive edges in U.S. businessmen and narrow their profit margins, so the Fed Reserve may not be willing to raise rates. However, the Fed has been saying that its rate decision depends on whether inflation will reach the goal of two percent after running below that for more than three years. “The news flow has been more bullish to gold after the Chinese central bank currency devaluation“, Macquarie analyst Matthew Turner said.

Since then, the situation in China has grown more worrisome.

Overseas, China’s stock market roiled Asian and European stocks, on fears that the country’s currency, the yuan, will continue to erode. Committee members specifically noted concerns over the rapidly rising dollar and “china raised concerns”. They also noted that Latin American economies – major U.S. trade partners – have also slowed down this summer. When the dollar rises, U.S. exports become less competitive in overseas markets and foreign goods can consume greater market share in the United States.

At the same time, “some” officials said economic reports had not yet provided the central bank the “reasonable confidence” it has been seeking that inflation will drift toward the Fed’s annual 2% target over the medium-term.

Still, “most” officials expected that downward pressure on inflation from declines in energy prices and a stronger dollar “would prove to be temporary”. The Fed has made clear that it wants to raise rates this year.

The record of the July 28 to 29 FOMC meeting gave no clear indication of when the Fed will pull the rate trigger, which some experts had put as early as the next FOMC meeting just four weeks away.

The front-month futures contract in US crude, which expires on Thursday, dropped as low as $40.40 per barrel, its lowest since March 2009, with a break below $40 seen as likely to trigger a fresh wave of selling.