While a skim of the FOMC Minutes suggest the committee is balanced on when (or if) to raise rates, WSJ's Jon Hilsenrath has just provided some more color confirming that "Fed officials are cautious about overseas developments but appear unalarmed," suggesting their confident economic growth forecasts point to a September rate hike (unless the whole world collapses obviously).
Worries about global turbulence and soft spots in the domestic economy weighed on Federal Reserve officials when they gathered at their June policy meeting, trepidations that could cause them to wait longer before raising short-term interest rates increases in the months ahead.
“While participants generally saw the risks to their projections of economic activity and the labor market as balanced, they gave a number of reasons to be cautious in assessing the outlook,” the Fed said in minutes of its June 16-17 policy meeting, released Wednesday with its regular three-week lag.
But many are confident...
The central bank effectively left its options open for now. Though the global outlook is uncertain and shifting, officials pointed to signs of progress in the domestic economy as reason to begin raising U.S. rates this year. Several had concluded that slack in the U.S. labor market had already disappeared, while others saw it being gone by year-end.
“The ongoing rise in labor demand appeared to have begun to result in a firming of wage increases,” the minutes said.
Moreover, some worried that if the Fed waits too long before raising rates, it might need to move abruptly later, which could cause financial instability. Some participants viewed the economic conditions for increasing the target range for the federal funds rate as having been met or were confident that they would be met shortly.
And as Hilsenrath concludes,
For now, Fed officials are cautious about overseas developments but appear unalarmed.
Finally, we have SF Fed Williams recent comments which seem indblowing...
“I visited China recently, and I arrived fully cognizant of the concerns people highlight—slower growth, the unsustainability of the current export-driven model, debt buildup, bubbles in the equity and housing markets, the risk of falling investment, and the overall international implications of those risks,” John Williams, president of the Federal Reserve Bank of San Francisco, said in a speech in Los Angeles Wednesday. “But I have to say that, after talking to officials and academics there, I was a lot less concerned about China’s near-term economic outlook on my return flight than I was heading over.”
* * *
Well we are just glad he spoke to academics and policy makers...