The following is SEB Group's reaction to today's FOMC minutes from the July meeting.
Whilst most Fed officials judged that the conditions for hiking rats had not yet been achieved at the July meeting, they noted that such conditions were approaching. That conditions were approaching that point may suggest that the Fed is eying liftoff as early as in September, although elsewhere the text suggested otherwise.
Low inflation in particular is making the decision a hard one and some participants expressed the view that incoming information had not yet provided grounds for "reasonable confidence" that inflation will move back to target over the medium term. Some were worried about a premature liftoff too and about some downside risks from economic and financial developments abroad, although participants generally viewed risks as nearly balanced. Altogether, China got 6 mentions in the minutes and Greece 8.
Since the July meeting, US economic data has been on the strong side with not only payrolls but service-sector ISM, retail sales and industrial production all suggesting that the economy is in pretty good shape - this is important since "almost all members" indicated that they would like to se more evidence that economic growth was sufficiently strong before voting to raise rates. Consumer prices, meanwhile, only rose 0.2 percent year-on-year in July and the devaluations in China may or may not have weakened the case for a September liftoff. After the minutes were released, the probability of a September hike fell to 40 percent from 50 percent earlier today.
For trade ideas, check out eFX Plus.