Fed's minutes pave way for December rate hike

The Federal Reserve released the minutes of the meeting held at the end of October and the start of November, at which policymakers voted to hold overnight interest rates unchanged between 1% and 1.2% for the second session, while announcing plans to normalize the balance sheet by October. 

FOMC members pointed to the data available to the Committee since the September 19-20 meeting, as the labor market kept improving while economic activity expanded moderately, as labor gains slipped while remaining solid in average this year, and the unemployment rate fell. 

Members said household spending rose modestly, but consumption growth foundations remained strong, as fixed-rate investment stabilized, while inflation gauges in the last 12 month were near the bank's long-term 2% target, while still below that target when excluding energy and food prices.

Members asserted the Committee's commitment to boost job opportunities and stabilize prices, while pointing to the slow growth in the first quarter as probably transitory, as members still project gradual tightening of the monetary policy to allow the economy to expand moderately.  

Members asserted the Committee's commitment to boost job opportunities and stabilize prices, noting that recent hurricanes Harvey, Irma led to widespread destruction and hardship for many people, with the impact expected to weigh on economic growth in the short term. 

However, members said that previous experiences with hurricanes point to a transient impact at best in the medium term, so they still project gradual tightening of the monetary policy to allow the economy to expand moderately.  

As of 07:47 GMT, the dollar index, tracking the greenback against a basket of currencies, fell 0.75% to 93.25 from the opening of 93.95, with an intraday high at 93.22, and the lowest at 93.96.

Similarly, members said that taking into consideration the labor conditions and current inflation rates, the Committee decided to hold interest raters into the range of 1% to 1.25 percent, while keeping the monetary policy accommodative, offering further support to the labor sector and nudging inflation firmly towards 2%. 

The Committee said it's assessing the current and projected economic conditions, with an eye towards achieving its targets of full employment and 2% inflation, while taking into consideration a wide group of data and economic information, including the labor market conditions and inflation indices. 

Members expect the economic conditions to develop in a way that allows for gradual tightening of the policy, with a path that ends just below the projected interest rates levels in the long term, while reaffirming that the actual path of short-term overnight interest rates depends on aforementioned economic projections and data. 

Otherwise, the Committee is carrying on its current policy of reinvesting its holdings of debt, mortgage-backed securities, and treasury bills and selling them in public auctions to trim them down from their current high levels in the long term, and in order to keep the financial conditions accommodative.

The FOMC has started the process of normalizing the balance sheet in October, in order to cut down the high levels of debt and mortgage-backed securities held by the Federal Reserve, as all the members agreed on the principles of normalizing the policy through the steps detailed in the additional document submitted alongside the usual bank statement in this meeting. 

The Committee wants to cut its monetary holdings gradually by reinvesting them through the open market system, while expecting the treasury bill sales to reach $6 billion at the start of the process, while rising to $30 billion a month in 12 months.

As for mortgage-backed security sales, they will start at $4 billion and advance to $20 billion a month after a year of the process. 

The Committee said that gradual cuts in the bank's debt holdings will trim down the reserve balance to way below recent years, while still remaining above the levels seen before the global financial crisis. 

Members are aiming to change the targeted range for federal money as the main way to change the policy, while standing to downgrade their interest rate target in case economic conditions deteriorated. 

Finally, the Committee asserted it stand ready to use all the tools available to it to increase the balance sheet again if conditions called for heavy easing policies that couldn't be satisfied only with cutting interest rates on federal money.