Here’s what the Fed is thinking ahead of its widely anticipated September rate hike

Now what do we have here?
Now what do we have here?
Image: AP Photo/Manuel Balce Ceneta
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The US Federal Reserve released the minutes (pdf) from its July meeting a little earlier than expected. And while officials’ positions weren’t quite as definitive as the market would like, it still appears likely that the Fed will lift interest rates for the first time since 2004. 

As we approach the fateful September gathering, here’s what officials said about all the big stuff.

Unemployment (10 mentions)

The unemployment rate is down, but so is the labor force participation rate. Jobs growth is coming along nicely.

“On balance, labor market indicators suggested that underutilization of labor resources had diminished since early this year.”

GDP (12 mentions)

The economy is growing slowly, but it’s still growing—even if it things don’t seem as sunny as they did not long ago.

“Participants generally viewed the incoming data as confirming their earlier assessment that the weak report on real GDP in the first quarter reflected transitory factors and expected that real economic activity would continue to expand at a moderate pace over the balance of the year, leading to further improvement in labor market conditions.”

Inflation (71 mentions)

Prices are going to start rising any month now, they swear.

“Participants generally continued to anticipate that, with appropriate monetary policy, inflation would move up to the Committee’s objective over the medium term, reflecting the anticipated tightening of product and labor markets and stable longer-term inflation expectations.”

Wages (7 mentions)

The amount of slack in the labor market is falling, but so-so earnings growth means wages are a bit of a question mark.

“In addition, it was noted that considerable uncertainty remained about when wages might begin to accelerate and whether that development might translate into increased price inflation.”

China (6 mentions)

Navigating monetary policy during a slowdown of the world’s second-largest economy could be tricky.

“While the recent Chinese stock market decline seemed to have had limited implications to date for the growth outlook in China, several participants noted that a material slowdown in Chinese economic activity could pose risks to the U.S. economic outlook.”

Oil (12 mentions)

Cheap oil does not make their jobs any easier.

“Some participants cited downside risks to inflation, pointing to the absence of any noticeable response of inflation to the reduction in resource slack over the past several years, risks of further declines in oil and commodity prices, and the possibility of further appreciation in the dollar.”

“Normalization” (13 mentions)

The US economy is still on shaky footing, but, whether or not a hike comes in September, it’s coming soon. Besides, there’s no indication the Fed is raring to crank rates up quickly.

“The Committee reiterated its expectation that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”