Fed’s July minutes show no definite commitment to September rate increase

The Fed’s comments on interest rates, as reported in the newly released minutes from their July meeting, are being interpreted to mean that the central bank is not yet committed to a September increase, as expected by many economists.

USA Today (8/20, Davidson) reports that according to the minutes, Fed policymakers said they were “approaching” their first interest rate hike, but “needed to see further improvement in the economy and labor market.” The summary “provides a no clear signal of when” the Fed will raise rates. The Wall Street Journal (8/20, Hilsenrath, Subscription Publication) reports that the minutes show no clear decision has been made on raising rates in September.

The New York Times (8/20, Appelbaum, Subscription Publication) reports that Fed officials “want to see more evidence the economy is in good health before they start to raise interest rates.” Still, the Times says that the minutes are “adding yet more weight to the expectation that the Fed will raise rates later this year, perhaps as soon as the next meeting of the policy-making committee in mid-September.” Reuters (8/20, Schneider, Lange) adds that the minutes showed Fed officials concerned about global economic weakness and consistently low domestic inflation.

The AP (8/20, Crutsinger) reports that July meeting minutes indicated that the Fed “edge[d] closer last month to a decision to raise interest rates as early as September,” but did indicate concerns about wages, inflation and China’s economic slowdown. The AP adds that since the Fed’s July meeting, “the situation in China has grown more worrisome.” A separate AP(8/20, Crutsinger) article identifies the biggest concerns the Fed officials discussed during their July meeting, including the rising US Dollar, health of the US labor market, recent economic developments in China, continued misses on the target levels for inflation, and the possibility of another “government shutdown and standoff over the debt limit.”

Stock Down On Fed Concerns. The AP (8/20) reports that US stocks fell on Wednesday “as investors got mixed signals from the Federal Reserve over the possibility of an interest rate hike in September.” The Dow Jones Industrial Average fell 162.61 points to 17,348.73, while the S&P 500 was off 17.31 points to 2,079.61 and the Nasdaq Composite Index dropped 40.30 points to 5,019.05.