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The Federal Reserve is not on the same path when it comes to raising interest rates, the minutes of last month’s Federal Open Market Committee (FOMC) revealed on Wednesday.

Policymakers are struggling to balance concerns over declining inflation with signs of a job market that continues to tighten. As a result, officials were split on whether further rate hikes are warranted.

“Some participants…. [expressed] concerns about the recent decline inflation,” the minutes of the 25-26 July FOMC meeting showed. For these members, the Fed “could afford to be patient under current circumstances.

On the other side of the debate were more hawkish members “worried about risks arising from a labor market that has already reached full employment and was projected to tighten further.” [1]

The labour market continues to be the strongest component of the U.S. recovery. Employers have added more than 200,000 jobs in three of the past four months.[2] The unemployment rate is currently the lowest it has been in more than 16 years.

Policymakers voted to keep policy on hold last month after raising rates in three of the previous five meetings. The Fed’s most recent quarterly projections, which were released in June, showed plans to hike interest rates once more before the end of 2017.

Despite the uncertainty, traders upped their bets that the Fed will tighten policy in December, according to the CME Group FedWatch tool. As of Wednesday, traders assigned a 46.8% probability of a quarter-point increase at the final FOMC meeting of the year. That’s up from 42% on Tuesday.[3]

The minutes failed to deter U.S. stocks from notching their third consecutive gain. The large-cap S&P 500 Index climbed 0.1% to close at 2,468.11. The Dow Jones Industrial Average advanced 0.1% to 22,024.87. The technology-heavy Nasdaq Composite Index was the best performer in percentage terms, rising 0.2% to 6,345.11.

Calm has returned to Wall Street after last week’s volatile selloff. This bodes well for equities over the short term as investors navigate through a historically difficult patch of the year.

In terms of monetary policy, the FOMC will hold its next meeting on 19-20 September. The official rate statement will be accompanied by the central bank’s latest economic projections covering GDP, unemployment and inflation.

[1] Jeff Cox (16 July 2017). “Fed minutes: Central bank split over path of rate hikes.” CNBC.

[2] Trading Economics. United States Non Farm Payrolls.

[3] Eren Sengezer (16 August 2016). “CME Group FedWatch’s December hike probability edged higher after FOMC minutes.” FXStreet.

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