The minutes showed that Fed policymakers acknowledged the possibility that downside risks to economic activity had increased somewhat, and that several participants were anxious that inflation could be dragged even lower.
The slowdown in the world’s number two economy was “likely to depress USA net exports”, and could cause the dollar to appreciate, weighing down on growth and inflation, the FOMC said.
Gold climbed on Friday in a delayed reaction to minutes of the Federal Reserve’s last policy meeting that showed the U.S. central bank was in no hurry to hike rates.
“The tone from the FOMC minutes was slightly more dovish, although this wasn’t too surprising”, said ANZ.
Profiting from a weaker U.S. dollar, the gold price has risen above $1,150 per troy ounce again this morning. Most policy makers, however, thought the Fed’s first rate hike in a decade should still come this year.
Inflation is an obvious deterrent to a rate liftoff, considering longer-term price stability is a fundamental priority for the Fed as part of its dual mandate.
Higher U.S. Treasury yields underpinned the dollar as equities rallied on expectations the Fed might hold off on hiking, with the yield on the benchmark 10-year note US10YT=RR at 2.065 percent in Asian trading, up from its USA close on Wednesday at 2.060 percent.
In addition, central bankers argued against a rate hike by noting that it’s easier for the Fed to use monetary policy to fight against rising inflation than to fight deflation, which they feared could occur if they raised rates too early.
Overall, the minutes contain similar mixed messages to the statement and dot plots at the time – most see a move this year but concerns regarding the worldwide environment and US$ strength had increased.
Economists expect that these minutes will shed a few light on why the Fed made its decision, and just how concerned officials were about the market volatility that ensued a month before the FOMC met. The euro was trading at 134.76 yen EURJPY=, down about 0.1 percent. Against the Swiss franc, the dollar hit 0.96230 franc, its lowest level in almost three weeks.
