Investors look to Fed minutes for rate hike clues
When its last meeting ended July 29, the Federal Reserve hinted that its first interest rate hike in nearly a decade was nearing. All it wanted to see was “some further improvement in the labor market” and more confidence that inflation will move back up to its 2% objective.
That got Wall Street thinking that the Fed would move at its Sept. 5-16 meeting. Today’s release of the minutes of the Fed’s July meeting could offer more clues related to its rate hike “liftoff” timetable.
“At the time of the July meeting, there was a higher expectation that they would move in September,” says Kate Warne, investment strategist at Edward Jones.
Warne added that it would not surprise her if the minutes “reaffirmed the view” of a September hike “unless we see weak employment growth” in the August jobs report set for release Sept. 4.
But there’s a catch, she says: “Since the July meeting there’s been a lot more international turbulence.” Warne, of course, is referring to the market angst sparked last week by China’s decision to devalue its currency and the continued selloff in oil prices.
“The question will be: Does weakness in China and international disruptions make it more likely the Fed stays on hold, as in the past the Fed has commented on international conditions as weighing” on its deliberations, Warne says.
However, she still believes the Fed is more focused on domestic issues, such as the strengthening labor market and better growth numbers in the U.S.