• Fed policymakers show rising confidence on inflation, economic outlook: minutes
The Federal Reserve’s rate-setting committee showed more confidence in the need to keep raising interest rates at its last policy meeting, with most believing that inflation would perk up.
The more upbeat take on inflation in the minutes of the Jan. 30-31 meeting released on Wednesday will likely further cement expectations that new Fed chief Jerome Powell will lead his colleagues in raising interest rates next month.
“Members agreed that the strengthening in the near-term economic outlook increased the likelihood that a gradual upward trajectory of the federal funds rate would be appropriate,” the Fed said in the minutes.
It added that recent information on inflation received by voting members “along with prospects for a continued solid pace of economic activity provided support for the view that inflation...would likely move up in 2018.”
“Almost all participants continued to anticipate that inflation would move up to the...2 percent objective over the medium term as economic growth remained above trend and the labor market stayed strong,” the minutes said.
• The market widely expects the Fed to approve a quarter-point increase at the March meeting that would take the rate up to a target range of 1.5 percent to 1.75 percent. The rate is tied to most consumer debt. In addition to gradually increasing rates the committee also is slowly unwinding its portfolio of bonds, or balance sheet.
• Philadelphia Federal Reserve Bank President Patrick Harker on Wednesday said he still thinks just two interest-rate hikes this year is "likely appropriate," but signaled he is open to more if needed.
Sticking closely to a view he laid out earlier this year, Harker said he expects the U.S. economy to grow 2.5 percent this year before slowing to 2-percent growth next year and to below 2 percent in 2020.
Unemployment, he forecast, will fall from 4.1 percent now to 3.6 percent by the middle of next year before rising back up a few tenths of a percentage point, while job growth will remain strong.
And inflation, while still below the Fed's 2-percent goal, should meet or exceed that objective by the end of 2019, he forecast.
· Expectations for a quarter-point hike at the Fed’s next meeting in March are currently 93.5 percent, according to Thomson Reuters data. The Fed has forecast three rate hikes in 2018.
•The dollar rose to a more than one-week peak on Wednesday, extending its recovery from last week, helped by higher short-term Treasury yields, and as minutes of Federal Reserve’s January meeting showed policymakers confident in the need to keep raising interest rates.
The dollar index, which measures the greenback against a basket of six other major currencies, was up 0.37 percent at 90.046, after hitting a high of 90.134 earlier in the session.
The yield on the two-year Treasury note was at 2.270, after hitting a nine-year high of 2.282 earlier in the day.
• The euro edged lower after the release of February’s preliminary purchasing managers’ survey for the euro zone implied the pace of growth set in January, the fastest in well over a decade, has diminished a little in February.
The euro has been driven by dollar weakness and then the recent recovery, but investors remain long on the common currency in anticipation the European Central Bank will soon begin unwinding its balance sheet. The euro was at $1.2276.
• Sterling edged up modestly from a one-week low against the dollar on Wednesday, after the Bank of England’s chief economist said interest rates might need to rise faster than markets expect to keep inflation in check.
By 1745 GMT sterling was trading at $1.3959, still down 0.3 percent on the day but higher than the levels of around $1.3935 it had traded at before the testimony.
Analysts said the unexpected tick higher in the jobless rate - to 4.4 percent from 4.3 percent in the previous three months - was a mild negative, but would not be likely to shift expectations of a rate hike in May.
• Sam Nunberg, a former political aide to Donald Trump, will be interviewed on Thursday as part of a U.S. special counsel’s investigation of Russian meddling in the 2016 election, two people with knowledge of the matter said.
Nunberg started working for then-businessman Trump in 2011, making him one of his earliest political advisers, but he was fired from the Republican’s campaign in August 2015 before the heat of the 2016 presidential race.
• Oil prices were little changed on Wednesday ahead of data expected to show rising crude inventories in the United States and as the dollar strengthened from last week’s three-year lows.
Brent crude futures settled 17 cents, or 0.3 percent, higher at $65.42 a barrel, after trading between $64.40 and $65.53.
West Texas Intermediate crude (WTI) futures fell 11 cents, or 0.2 percent, to end at $61.68 a barrel, after trading between $61.86 and $60.92.
Reference: Reuters, CNBC
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