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One one hand, many officials see labor market far from normal, but others, also described as “many”  see how jobs bring a rate rise.  The minutes state that FOMC members “differed” on the degree of remaining slack in the labor market. This is the big issue, and the Fed moves from dovish to split. The market is digesting the data slowly, but the market is leaning towards a stronger dollar.

On inflation, there are no surprises: the  downside risks are diminished, and this is similar language to the actual statement. Regarding  reinvestments of QE, most want to see a reduction or totally ending this “passive QE” after the first rate hike.

Here is a hawkish line from the minutes:

Many members noted, however, that the characterization of labor market underutilization might have to change before long, particularly if progress in the labor market continued to be faster than anticipated.

There is usually a clearer distinction between  the quantitative words: the words “many” and “most” were usually reserved for more dovish observations, while “several”, “some” and “few” for hawkish ones. This time is different, with “many” for both views of the labor market.


The minutes from the July meeting carried  some weight as that press conference did not consist of a press conference. On the other hand, the focus is set to quickly shift to Fed Chair Janet Yellen’s  speech in Jackson Hole on Friday. The markets  try to dissect every word to see if the current assessment of the economy implies an early or late rate hike.

EUR/USD is digging lower to 1.3270, USD/JPY is aiming at 103.60 and GBP/USD is about to lose 1.66. USD/CAD is up but shy of 1.10 NZD/USD is under 0.84 and AUD/USD down under 0.93.

The US dollar was on a roll  earlier in the day, making multi-month highs against many currencies.

EUR/USD traded around 1.3290, GBP/USD above 1.6620, USD/JPY just under 103.40, AUD/USD was relatively resilient at 0.9310, NZD/USD edged up above 0.84 and USD/CAD around 1.0950.

In the July meeting, the Fed tapered bond buys for the sixth time to $25 billion / month as expected. The statement was relatively balanced with less concern about inflation but with a statement about the  underutilized labor market. Yellen’s speech in Jackson Hole is due to focus on  jobs.

The Fed said that unless there are surprises, QE will totally end in October. The big question remains about the interest rate. When will it rise?