Fed rate hike unlikely in September

NEW YORK-It is unlikely the Federal Reserve will raise its benchmark interest rate at its meeting on September, after minutes from July revealed dovish remarks by bank officials, experts told on Thursday.

The minutes of the Fed's July meeting showed that nine of the 10 Federal Open Market Committee members wanted to hold a rate hike last month but officials were mostly divided about when the next hike would be made.

"The most important point was that there was a lot of disagreement," said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at Brookings Institute.

"They also didn't have any consensus about what to do ... some of them are very patient and they don't want to move too soon," he added.

Ryan Sweet, director at Moody's Analytics, said the dovish side was "louder" in the minutes, and "the Fed is being coy about when to raise rates".

"They are not showing their cards ... I think the Fed wants be more confident that inflation is moving back to their two percent target before they raise the rates again," he explained.

Sweet also noted that the next rate hike is dependent on the incoming macroeconomic data.

The U.S. economy added 255,000 jobs in July, while the average job gains in the last three months increased to 190,000 with the revisions.

However, July figures for retail sales and consumer price index did not change much compared to the previous month. This does not give many positive signs to the Fed for the well-being of the overall economic outlook.

"The economy is clearly improving. Not all the numbers point in the same direction but basically things look okay-to-better," Wessel said.

"The fact that inflation remains below target and the recent consumer price numbers were so modest will give the people at the Fed to wait a little longer," he added.

External risks

Steve Goldman, president of trading firm Goldman Management, stated that the Fed is slightly closer to a rate hike after the rise in non-farm payrolls and revisions, but pointed out to external risks.

"The fragility of the economic recovery on a global basis, along with the Brexit still filtering through, makes it tougher for the Fed to be aggressive," he explained.

The U.K.'s vote to leave the EU seemed a lesser concern for the Fed, according to the minutes. Meanwhile, attention was focused on a new wording in the minutes that read "economic conditions would soon warrant taking another step in removing policy accommodation".

This leaves only one question that everyone wonders -- when will be the next rate hike?

Wessel said it is unlikely for the Fed to increase interest rate in September "unless anything changes in the picture".

"I think they definitely left the door open for a rate increase sometime later this year, but they certainly didn't signal anything as imminent. Based on what I see now, it is likely that they wait until December, but a lot can happen between now and then," he said.

Goldman said "it is too early for raising the interest rate in September," adding that there is a 50 percent chance for a rate hike at the end of the year, saying: "I think there is a tight vote coming in December."

Sweet stated that he expects a 20 percent possibility for a September hike, 20 percent for November and 60 percent for December.

Mark Kepner, managing director at equity agency and brokerage firm Themis Trading, said the central bank may want to look at the next few months until December but stressed that Fed Chair Janet Yellen would refrain from making a surprise move.

"Yellen likes to telegraph what she's going to do. That's the way she tends to work and the Fed doesn't like to surprise investors," he concluded.

The Fed's next meeting will be held on Sept. 20-21. Until then, both markets and investors will continue to closely watch incoming macroeconomic data and any signals from bank officials.

By Ovunc Kutlu and Gulbin Yildirim (AA)