Stocks Steady After Release of Fed Minutes

by Susie Olson July 6, 2017, 0:23
Stocks Steady After Release of Fed Minutes

They think the Fed will skip a rate hike that meeting.

In the minutes, a few policymakers also said the inflation weakness made them less comfortable with the current implied path of rate hikes. Thus far, the Fed has not been dissuaded by lower inflation readings that suggest the economy may not be as strong as other economic indicators suggest.

The details of the meeting, at which the USA central bank voted to raise interest rates, also showed that several officials wanted to announce a start to the process of reducing the Fed's large portfolio of Treasury bonds and mortgage-backed securities by the end of August but others wanted to wait until later in the year.

The minutes also showed central bankers divided over precisely when to begin reducing the Fed's massive balance sheet, a task that they have indicated they will begin before the end of the year.

In other economic news, new orders for United States manufactured goods fell by more than expected in the month of May, according to a report released by the Commerce Department on Wednesday.

"Most participants viewed the recent softness in these price data as largely reflecting idiosyncratic factors.however, several participants expressed concern that progress.might have slowed and that the recent softness in inflation might persist", the Fed said in the minutes.

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Officials also disagreed about the likely impact, with some arguing balance sheet reductions were effectively a substitute for rate increases, while others predicted only a modest economic impact.

She said the Fed eager to keep increasing interest rates at a gradual pace to avoid a situation in which it would need to raise rates more quickly to offset inflation, which could destabilize the economy. As the Fed raises rates, lenders have lowered borrowing costs, the opposite of the effect intended by the central bank. But Ms. Yellen downplayed the extent of the Fed's concerns at a news conference after the Fed's June meeting.

Yellen said last month that asset valuations look "somewhat rich" using traditional metrics like price-earnings ratios.

It topped $1,223 in electronic trading immediately after the Fed minutes, then pulled back under $1,221. Any profit the Fed has at the end of the year must be sent to the U.S. Treasury.

The Federal Reserve is figuring out when to start unloading much of its $4.5 trillion in bond holdings - a major turning point for an economy still healing from the 2008 financial crisis.


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