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Fed policymakers closer to rate hike, but inflation doubts remain

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It indicated at the time that it might raise rates another four times in 2016.

The dollar rally had lost momentum with the release of the Federal Open Market Committee (FOMC) meeting minutes yesterday as the central bank was clearly divided on the path of American interest rates.

Among the full 17 policymakers in attendance, there was further division over how much more economic data will be needed before a rise is implemented. It was generally noted among the group that a reasonable argument could be made to hike now or for waiting for some additional inflation and labor market information. The Fed's next meeting is November 1-2.

The Federal Reserve might want to hold off on policy changes until after the US presidential election on November 8, Philadelphia Fed President Patrick Harker said on Thursday.

She said the Fed is facing a time crunch because rates need to be higher than current levels in case the economy goes into a recession again.

The Fed kept its federal funds rate unchanged in its September meeting amid recent weak economic data and tepid inflation, but strongly signaled that the central bank could have one rate hike by the end of this year. The higher unemployment rate, however, was good news as it was a result of more people returning to the U.S. labor market.

But the majority of Fed officials argued for delay, contending that inflation was still very low and three was still room for the unemployment rate to fall further without triggering high inflation.

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The Federal Reserve's decision not to increase rates in September was a close call, the minutes released on Wednesday show.

Trump told CNBC in September that Fed Chair Janet Yellen should be "ashamed" by her actions as head of the USA central bank, without providing evidence of his allegations. The Fed meeting minutes even came out better than expected for the greenback.

On top of that, employers added 156,000 jobs in September-fewer than the 170,000 expected by economists.

"So here's the most confident forecast I can give you about mortgage rates: We'll see many news reports on Thursday about how rates have jumped in the past week", Smoke said. However, nearly no one believes the Fed will raise rates one week before the USA election, even though Fed Chair Janet Yellen stresses that the election doesn't influence its decisions. The strength of economic data can change direction quickly, so the Fed has avoided boxing itself into a corner on interest rates.

"Markets seem to be just a bit relieved to find little to suggest that the Fed would be ready to move as early as November which, in truth, would burnish their apolitical bona fides", said Tai Wong, director of base and precious metals trading for BMO Capital Markets in NY.

Yellen is scheduled to deliver a speech on Friday in Boston, which may offer insight into the Fed's latest thinking.

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