The Federal Open Markets Committee (FOMC) of the US Fed raised the federal funds rate range to 1.75%-2.00% at its last meeting in mid-June. The move was widely expected and another one, possibly two rate increases are expected before the end of 2018.
The minutes of the meeting have now been released and there appears to be no change in the FOMC’s general attitude. The threat of a US-Chinese trade war is noted as a cause for concern but it appears as if members of the FOMC have not given these concerns anywhere near as much weight as they have to the strength of the US economy. The FOMC also noted the current “stance of monetary policy would remain accommodative stance” after the rate increase “supporting strong labor (sic) market conditions and a sustained return to 2% inflation.”
Westpac senior economist Elliot Clarke said the US Fed is likely to maintain its current course of raising rates despite recent uncertainties. “Overall, the FOMC is intent on continuing with its gradual normalisation of policy, believing that the underlying strength of the US economy will win out over global uncertainties, a large portion of which is the result of President Trump’s political agenda.” However, he did remind us a continuation of the normalisation policy would always be “data dependent”.
