Latest Fed Minutes Point to December Rate Hike

The Fed's next meeting runs from October 31 to November 1, but an interest rate hike is not expected until its final meeting in December.

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The US Federal Reserve’s September meeting minutes indicate that another interest rate increase in December is likely, despite concerns over low inflation.

Bart Melek, head of commodity strategy at TD Securities in Toronto, told Reuters after the minutes were released on Wednesday (October 11) that they “seemed to be stressing that low inflation may not be transitory and emphasized data dependency.”

He added, “[t]his is somewhat positive for gold relative to where we were positioned just ahead.” He believes gold could hit $1,300 per ounce by the end of the week. The yellow metal was up 0.4 percent, trading at $1,292.88, as of 3:43 p.m. EST on Wednesday.

Meanwhile, the silver price rose 0.8 percent to reach $17.22 per ounce by that time on Wednesday. US treasuries and Wall Street stocks remained relatively steady following the release of the minutes, but the US dollar fell to an almost two-week low.

Members of the Federal Open Market Committee (FOMC) and the Board of Governors said they will focus on inflation data coming in over the next few months when considering future rate hikes. However, many meeting participants feel another rate increase in 2017 is “likely to be warranted.”

Others believe that “no further increases in the federal funds rate [are] called for in the near term,” while some are “more worried about upside risks to inflation arising from a labor market that [has] already reached full employment and [is] projected to tighten further.”

The minutes show that the effects of Hurricanes Irma and Harvey on the US economy were briefly discussed during the Fed’s last meeting, but were deemed “unlikely to materially alter the course of the national economy over the medium term.”

The FOMC did note that higher prices for gasoline and other items in the aftermath of the major storms should boost inflation temporarily; however, apart from that, “inflation on a 12-month basis [is] expected to remain somewhat below 2 percent in the near term.” According to the minutes, inflation is expected to stabilize around the committee’s objective of 2 percent over the medium term.

The next Fed meeting runs from October 31 to November 1, and its final meeting of the year, when the final rate hike of 2017 is expected, will take place from December 12 to 13.

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Securities Disclosure: I, Melissa Shaw, hold no direct investment interest in any company mentioned in this article.

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