FXStreet (Bali) – The FOMC Minutes struck a cautious tone, with markets paring back the odds of a September rate hike, notes the ANZ Research Team.
Key Quotes
“The FOMC Minutes had a swift impact on both currency and interest rates markets. The Committee’s level of concern about the labour market was heightened, particularly regarding the lack of wage inflation that might suggest more labour market slack than previously believed.”
“The dynamics of inflation expectations were also highlighted as a key uncertainty.”
“The key sentence that markets have focused on is this one: “almost all members indicat[ed] that they would need to see more evidence that economic growth was sufficiently strong and labor market conditions had firmed enough for them to feel reasonably confident that inflation would return to the Committee’s longer-run objective over the medium term”.
“Given that commodity prices have fallen further since the FOMC meeting, it is a fair assessment by the market that the odds of rates being lifted next month is not as high as it was.”
“And in the bigger picture, it is difficult to really see all this as ‘good news’ given the fact that global economies are not playing by the usual rules. The longer official rates remain at (practically) zero, the greater the distortions will be.”
(Market News Provided by FXstreet)