Stocks Steady After Release of Fed Minutes

06 July, 2017, 00:05 | Author: Essie Rivera
  • Mike Powell  Getty Images

Cramer spoke ahead of the release of the minutes from the June 13-14 Federal Open Market Committee meeting, where policymakers raised benchmark interest rates by a quarter point.

At the June meeting, the Fed gave a clear outline of its plan this year to reduce its portfolio but gave no precise timing.

The minutes said "several participants endorsed a policy approach" where the labor market would undershoot their estimate of full employment "for a sustained period".

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

Last month's 8-1 vote to lift the benchmark interest rate another quarter percentage point, its second this year, signaled the Fed's confidence in a growing USA economy and the eventual inflationary effects of low unemployment.

The minutes also indicated that members generally supported the Fed's current strategy for slowly implementing rate hikes.

Officials also disagreed about the likely impact, with some arguing balance sheet reductions were effectively a substitute for rate increases, while others predicted only a modest economic impact.

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The Fed voted in June to raise short-term rates by a quarter point to a range of 1 to 1.25 percent, the third quarter in a row the bank has lifted rates.

On the other side of the Fed's dual mandate, the jobless rate declined to a 16-year low in May of 4.3 percent, beneath most Fed officials' estimate of the maximum use of labor resources. The Fed foresees one additional rate hike this year without specifying when that could occur.

Cramer said he still expects to see a rate hike in September. The rate-setting committee is next scheduled to meet to decide interest rate policy on July 25-26.

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.

Instead, investors appear to be piling into the stock market, which continues to hit record highs, buoyed by solid corporate earnings and expectations of a corporate tax cut. The minutes said some participants see evidence that investors are taking larger risks and a few are concerned about "a buildup of risks to financial stability". Any profit the Fed has at the end of the year must be sent to the U.S. Treasury.

Several Federal Reserve officials wanted to start reducing the trillions of dollars of assets held by the central bank "within a couple of months" to accelerate the return to a more normal monetary policy after years of battling the Great Recession, according to an account released Wednesday of their most recent meeting.

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