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Fed Minutes Provide Further Hints At December Rate Hike


Minutes from the Federal Reserve's monetary policy meeting held earlier this month are likely to reinforce expectations for another quarter-point increase in interest rates next month.

The minutes of the Federal Open Market Committee meeting said almost all participants agreed another increase in rates was "likely to be warranted fairly soon."

The Fed noted a near-term rate hike would be dependent on incoming information on the labor market and inflation coming in line with or stronger than current expectations.

CME Group's FedWatch tool currently indicates an 82.7 percent chance the Fed will raise rates to a range of 2.25 to 2.50 percent at the two-day meeting scheduled for December 18th and 19th.

However, the minutes noted a few participants continued to favor gradual increases in rates but expressed uncertainty about the timing of such increases.

A couple of participants also noted rates might currently be near a neutral level and warned further increases could unduly slow economic growth and put downward pressure on inflation and inflation expectations.

In remarks to the Economic Club of New York on Wednesday, Fed Chairman Jerome Powell described the current level of interest rates as "just below" neutral.

"Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy--that is, neither speeding up nor slowing down growth," Powell said.

The latest remarks seemed to conflict with comments Powell made early last month, when he described rates as a "long way from neutral."

Meanwhile, the minutes of the latest Fed meeting said participants agreed information received since the September meeting indicated the labor market had continued to strengthen and that economic activity had been rising at a strong rate.

Participants generally indicated little change in their assessment of the economic outlook, with above-trend economic growth expected to continue before slowing to a pace closer to trend over the medium term, the minutes said.

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