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[sludgehound]

Rate hike "approaching" ? MW

By Greg Robb , MarketWatch
It's coming: Most Federal Reserve officials thought economic conditions needed for an interest-rate hike were "approaching," according to minutes from the July meeting released Wednesday that suggested that a September move is a possibility.
"Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point," according to the minutes (http://www.federalreserve.gov/newsevents/press/monetary/20150819a.htm).
"This was far more explicit of a smoking gun than I was expecting to see," said Stephen Stanley , chief economist at Amherst Pierpont Securities .
The Fed minutes were released early after a news organization broke the embargo, which was set to lift at 2 p.m. Eastern. MarketWatch gets the report on embargo but was not the outlet that sent the information early.
Read more:Early release of meeting minutes is latest embarrassment for the Fed (http://www.marketwatch.com/story/more-embarrassment-for-fed-as-minutes-released-early-2015-08-19)
In a statement, Bloomberg L.P. said it broke the embargo by sending a headline out while it was preparing the material, according to a statement read on CNBC.
Stocks essentially wiped out the day's losses just after the minutes were published, but have since turned lower (http://www.marketwatch.com/story/us-stocks-futures-slip-with-fed-release-on-the-horizon-2015-08-19). Treasury yields are down.
Markets thought the minutes were less hawkish than expected, said Millan Mulraine , deputy head of U.S. strategy at TD Securities . He noted that there were lingering concerns about the subdued inflation performance.
Avery Shenfeld , economist at TD Securities , said the Fed "couldn't be that hawkish in July or they would have raised rates then and there."
He said the minutes "certainly were in line with a central bank that was nearing an inflection point."
The undercurrent of the discussion showed broad support among Fed officials for an increase in interest rates sooner rather than later.
"A September rate hike is not a done deal, and if it happens we cannot rule out a dissent or two, but provided the August labor data aren't disastrous and markets are not in disarray at the time of the meeting, we expect the Fed to move," said Ian Shepherdson , chief economist at Pantheon Macroeconomics.
One argument made by supporters of a rate hike was that an appreciable delay in a tightening monetary policy would spark inflation or financial instability. But a minority of Fed officials counseled patience. They noted there were no grounds to think inflation would move back to the 2% annual target, particularly because of the strong dollar and recent drop in crude oil prices.
Also read:U.S. housing costs continue to soar, CPI shows (http://www.marketwatch.com/story/us-housing-costs-continue-to-soar-cpi-shows-2015-08-19)
After the meeting, the Fed added the qualifier in its statement that it only needs to see "some" improvement in the labor market before it hikes rates. It also wants to be reasonably confident that inflation is moving up to 2%.
The Fed has made clear that it wants to raise rates this year. Fed watchers are divided into two camps,. Many think the Fed will move at the Sept. 16-17 meeting, but others argue the central bank will wait until December.
In another hawkish sign, "many" on the Fed said this was a one-step test, according to the minutes. They noted that further improvement in labor markets was "key" in supporting their expectation that inflation would move up.
The next monthly jobs report is scheduled for Sept. 4 .
Also read:Fed officials are concerned China woes could hit U.S (http://www.marketwatch.com/story/fed-officials-are-concerned-china-woes-could-hit-us-2015-08-19).
The minutes show Fed officials discussed when to cease or phase out reinvesting the proceeds of securities held on its balance sheet. Fed officials want to keep reinvesting the proceeds, which holds the balance sheet stable through the "early stages" of rate hikes, but made no decisions.
In a 10-0 vote, the Fed on July 29 kept rates between zero and 0.25%, where they have been since December 2008 .
- Greg Robb ; 415-439-6400; [e-mail]
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(END) Dow Jones Newswires
08-19-15 1710ET