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Hilsenrath Confirms Fed Confusion In Leaked FOMC Minutes

WSJ's Fed mouthpiece Jon Hilsenrath - whose embargo-assisted lightspeed typing and proofing was amusingly frontrun by someone else this afternoon - is out with his take on the Fed minutes, which some feared would be rendered less meaningful thanks to the currency market turmoil that's unfolded since the data-dependent FOMC's July meeting.

In an effort to cut through any confusion and extract some hints about what is or isn't coming in September, Hilsenrath digested the minutes, peered into his crystal ball, and came up with the following.

The Federal Reserve’s next policy meeting is four weeks away and officials show no clear sign of having settled on a decision about whether to raise short-term interest rates at that time.


Minutes of the Fed’s July policy meeting left mixed markers about whether central bank officials are leaning toward or against a rate increase at their next meeting after months of signaling that they intend to move away from the near-zero interest-rate policy before year-end.


“Most [officials] judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point,” said minutes of the Fed’s July 28-29 meeting, released Wednesday.


Their assertion that they were approaching a rate move might be read as a hint that they saw a September move in the cards, but the minutes showed that officials had wide-ranging views about taking that step and some notable trepidation.


“Some participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to 2 percent over the medium term and that the inflation outlook thus might not soon meet one of the conditions established by the [Fed] for initiating a firming of policy,” the minutes said.


Some also worried about moving prematurely and lacking tools to address downside shocks to the economy, and about downside risks to the economy from developments abroad, particularly China.


There was push back against hesitating. A number of officials argued that a rate increase could convey confidence to the world about the economic outlook and that the Fed needed to move in acknowledgment of the progress the economy had already made toward normalcy.