USA pre-open: Stocks seen flat to lower ahead of FOMC minutes

06 July 2017, 12:05 | Isaac Mcdaniel

Mike Powell Getty Images

Mike Powell  Getty Images

US stocks and bonds were little changed Wednesday following the release of minutes from the Federal Reserve's June meeting that showed officials readying plans to start gradually shrinking the Fed's balance sheet in coming months.

Some Fed officials want to announce the beginning of the process "within a couple of months", according to minutes of the USA central bank's June meeting. A few committee members who supported the June increase "indicated that they were less comfortable" with the forecasts for additional hikes through the end of next year because of concerns that inflation would remain below the Fed's 2% annual target, the minutes said.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, cited his concern about weak inflation as a reason that he voted against a rate increase at the June meeting. Inflation, in particular, has proved hard to nudge closer to the Fed's 2 percent target, while in the first three months of the year the economy grew at a rate of only 1.4 percent.

The minutes recorded policymakers' deliberations at last month's meeting, when the central bank raised interest rates by a quarter of a point to a range of one-to-1.25%.

Members of the Federal Open Market Committee - the Fed's rate-setting panel - "generally reiterated" their support for continuing to gradually raise rates, according to the minutes.

After that meeting, the Fed announced it planned to start reducing the balance sheet sometime this year but provided no timetable.

Fed officials lowered their long-term projections for both inflation and the unemployment rate, while their projected path for interest rate increases remained mostly unchanged. Meanwhile, U.S. officials will soon confront the challenge of raising the debt ceiling to continue to fund the government.

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Cramer said he still expects to see a rate hike in September.

The Fed's next meeting is July 25-26.

She said the Fed eager to keep increasing interest rates at a gradual pace to avoid a situation in which it would need to raise rates more quickly to offset inflation, which could destabilize the economy.

Financial conditions were also debated at the meeting, with some participants arguing that "increased risk tolerance" among investors could be lifting asset prices.

Some Fed officials are anxious that investors are not responding to the recent rate increases.

In a press conference following the conclusion of the June meeting, Yellen attributed lower inflation in part to temporary factors, like one-off decreases in the prices for cell phone services and prescription drugs.

Some members were also concerned that there could be a build-up of risks to financial stability.



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