Make us your home page
Instagram

Fed minutes: Conditions could 'soon warrant' rate hike

Investors will be paying close attention to a speech that Federal Reserve chairwoman Janet Yellen will give on Aug. 26 to an annual conference of central bankers in Wyoming for any further clues about the Fed's timetable for a rate hike. [Associated Press]

Investors will be paying close attention to a speech that Federal Reserve chairwoman Janet Yellen will give on Aug. 26 to an annual conference of central bankers in Wyoming for any further clues about the Fed's timetable for a rate hike. [Associated Press]

WASHINGTON — Federal Reserve officials believed last month that near-term risks to the U.S. economy had subsided and that an interest rate increase could soon be warranted. But they did not indicate when they would likely raise rates.

The minutes of their July 26-27 meeting show that officials were encouraged by a rebound in job growth. They also took note of a stabilization of financial markets after a bout of turbulence triggered by Britain's June 23 vote to leave the European Union.

The Fed officials believed those developments had lessened the risks for the economy in the short run. The minutes show that as a result, the officials thought a rate increase "was or would soon be warranted."

But a key factor holding the Fed officials back was the stubbornly slow rate of inflation, which has been running below the central bank's 2 percent target for more than four years, according to the minutes.

The minutes released Wednesday closely parallel the message the Fed sent in a statement it released after its July meeting.

In that statement, the Fed noted that the job market had rebounded from a brief slump. Still, it said it planned to monitor global economic threats and financial developments to ensure that they don't slow the economy.

This week, William Dudley, president of the Federal Reserve Bank of New York and a close ally of Fed Chair Janet Yellen, said in a television interview that a September rate hike is "possible." Dudley said he thought that solid job growth would continue and that the sluggish pace of the U.S. economy would pick up.

But, as the Fed itself as done repeatedly, Dudley stressed that any policy action would depend on the health of the most recent economic data.

Though some economists say they think the Fed will be ready to raise rates next month, most have said they think the policymakers will take no action before December.

The Fed's July decision to leave rates alone was backed by a 9-1 vote. Esther George, president of the Kansas City Fed, dissented in favor of an immediate rate increase.

In December last year, the Fed raised its benchmark lending rate from a record low near zero, where it had stood since the depths of the 2008 financial crisis. But in recent months, turbulence in financial markets and concerns about China and weakening global growth have persuaded the Fed to keep rates on hold.

Fed officials have also expressed concern about the tepid pace of U.S. growth, weakness in worker productivity, excessively low inflation and the long-term consequences of Britain's vote in June to leave the European Union.

Investors will be paying close attention to a speech that Yellen will give on Aug. 26 to an annual conference of central bankers in Jackson Hole, Wyoming, for any further clues about the Fed's timetable for a rate hike.

The minutes said "a couple" of officials had advocated a rate increase at the July meeting. However, the majority of the group agreed that waiting would give them more time to assess whether the economy was strong enough to withstand the potential aftershocks when the Fed does raise rates.

But Fed officials also noted the risks of waiting too long. If labor market conditions tightened so much that inflation pressures jumped, the Fed would have to respond with a more rapid series of rate hikes that could jeopardize the recovery.

Although near-term concerns associated with Britain's vote to leave the EU had dwindled, officials mentioned other threats that needed to be closely monitored, including the possibility that growth in Britain and the EU could be slower than expected. Some Fed officials also expressed concerns that weak capital positions and sizable non-performing loans at some European banks could also weigh on the continent's growth prospects.

In addition to lingering problems in Europe, some officials noted weakness in other parts of the global economy, including uncertainties over China's currency policies and the growth in Chinese debt.

Fed minutes: Conditions could 'soon warrant' rate hike 08/17/16 [Last modified: Wednesday, August 17, 2016 3:40pm]
Photo reprints | Article reprints

© 2017 Tampa Bay Times

    

Join the discussion: Click to view comments, add yours

Loading...
  1. Tampa is 15th-most popular city to move to with U-Haul

    Markets

    TAMPA —Tampa is undoubtedly a destination point, at least according to U-Haul.

    Tampa is the No. 15 destination for people moving with U-Haul trucks. | Times file photo
  2. Florida's economy growing faster than other big states and far better than U.S. overall

    Business

    When it comes to economic growth, Florida's running alongside the leading states and well ahead of the United States as a whole.

  3. Westshore Marina District project takes shape with another acquisition

    Real Estate

    TAMPA — One of Tampa Bay's prime waterfront areas took another major step toward redevelopment Friday as WCI Communities bought 2.35 acres in Westshore Marina District.

    WCI Communities, Lennar's high-end subsidiary,has paid $2.5 million for 2.35 acres in the Westshore Marina District for 35 townhomes. WCI is under contract  to buy an additional 9.5 acres.
[BTI Partners]
  4. Posh Guy Harvey RV park to open in Tampa Bay with $250,000 cottages

    Business

    HOLIDAY — Love those Guy Harvey T-shirts with the soaring marlins? In the not too distant future, you might be able to kick back in your own Guy Harvey cottage in the first-ever Guy Harvey RV park.

    Renderings of the clubhouse and an RV cottage site of the planned Guy Harvey Outpost Club & Resort Tarpon Springs.
[Guy Harvey Outpost Collection]
  5. Port Tampa Bay secures $9 million grant to deepen Big Bend Channel

    Business

    Port Tampa Bay has secured a $9 million grant from the U.S. Army Corps of Engineers for the widening and deepening of the Big Bend Channel in southern Hillsborough County.