The minutes of October’s Federal Open Markets Committee (FOMC) meeting were released and as with the September minutes, they revealed little in the way of new information. The September minutes confirmed more than a few FOMC members believed the conditions necessary for a rate increase had been met or would be met soon and the latest minutes indicate that the Committee now believes the first rate rise will likely occur in December. “Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting.” However, the committee is not unanimous; “Some others, however, judged it unlikely that the information available by the December meeting would warrant raising the target range.”
Westpac said the labour market remains critical to the FOMC, pointing to the statement in the minutes: “Almost all members agreed…labor market indicators, on balance, showed that underutilization of labor resources had diminished since early in the year”. As for what happens after the first rise, Westpac noted the Committee’s statement “beginning the normalization process relatively soon would make it more likely that the policy trajectory after lift-off could be shallow” and said the statements mean a December rise followed by a series of spread out rises through is 2016 is likely. “All of this argues for a first rate hike in December, but a cautious FOMC through 2016.” US cash markets reacted by increasing the odds of a December rate rise to 72% from the previous day’s figure of 64%.
Click here for the full text of the FOMC minutes.