ISM Associates: July Fed Minutes Reveal Division On Rate Hikes

ISM Associates: Federal Reserve policymakers elect to play a waiting game on US economy
ISM Associates: The minutes of the last meeting of the Federal Reserve have revealed a clear split amongst policymakers over the ideal timing of the next, much-vaunted increase in US interest rates. The voting members of the Federal Open Market Committee were split into two camps with the hawks believing that the world's biggest economy is at or near to a fully-recovered employment market and, as such, capable of withstanding a 25 basis points hike in the fed funds rate.
Several members were more dovish and expressed concern about an inflation rate that has undershot the central bank's 2% target for four years and wanted to wait for more confirmatory data before raising interest rates for the first time since December 2015.
Markets reacted positively to the news which reinforced doubts among investors over the Fed's willingness to move rates again. US stock indexes closed higher while Asian markets greeted the minutes with subdued optimism.
James Preston, Chief Economist at ISM Associates said, "This has become something of a monthly charade with the Fed seemingly incapable of effectively communicating its intentions to investors. They seem to be continually flip-flopping between concerns about economic growth, job creation and economic weakness abroad and, frankly, the never-ending comments from individual voting members only serves to add to the confusion."
ISM Associates says it does not anticipate any change in rates when the Fed next meets on September 20-21 despite the strong July jobs report.
"Retail sales and inflation indicators are quite weak and, although the Fed says it will be watching economic data closely in the run up to the September meeting, we think the fed funds rate will remain unchanged by the end of the year," concluded Preston.