The Federal Reserve’s Federal Open Market Committee finished its two day July meeting last week and, as expected, left the federal funds target rate unchanged at a range of 0% to 0.25%.
The committee’s view of US growth and general economic conditions is slightly more optimistic than in June and a rate rise appears to be not far away. Before the FOMC raise the rate it said it needs to see “some further improvement in the [labour] market” and be reasonably confident of inflation moving back “to its 2% objective”. Unemployment at 5.3% is now below its 65 year average and 0.2% lower than the June rate of 5.5%.
Westpac said the tone of statement sounded more upbeat and pointed to the part of FOMC statement which referred to a range of labour market indicators suggesting labour utilisation to be higher. They still think a September rate rise is likely. The Commonwealth Bank said the FOMC had left the “door open for a rate hike” in September and the two conditions required for an increase were “on track”.