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12-Oct2017

US markets closed higher after release of Fed minutes

The US markets closed higher on Wednesday, after minutes from the Federal Reserve's September meeting suggested caution among policy makers on the next interest rate hike which the market had widely expected in December. Federal Reserve policymakers had a prolonged debate about the prospects of a pickup in inflation and slowing the path of future interest rate rises if it did not, according to the minutes of the US central bank's last policy meeting on September 19-20 released. The readout of the meeting, at which the Fed announced it would begin this month to reduce its large bond portfolio mostly amassed following the financial crisis and unanimously voted to hold rates steady, also showed that officials remained mostly sanguine about the economic impact of recent hurricanes. As such several said that they would focus on incoming inflation data over the next few months when deciding on future interest rate moves. In the minutes, several Fed officials noted that the interpretation of inflation readings over the next few months would likely be complicated by a temporary increase in energy costs and prices of other items affected by storm-related disruptions. The call to not lose faith in gradual rate rises was echoed by two Fed policymakers. Kansas City Fed President Esther George urged her colleagues to be less fixated on the 2 percent inflation target and argued further rate hikes are necessary to ward off unwanted inflationary pressures. George said that waiting for inflation to hit the central bank's 2% target before further raising interest rates could be a mistake and lead to a possible overheating of the economy. Likewise, the San Francisco Fed's John Williams said that low unemployment also made him believe inflation was likely to move back to the Fed's target.

On the economy front, the number of job openings in the country fell slightly to 6.08 million in August from a record 6.14 million in July. Some 5.43 million people were hired and 5.23 million lost their jobs. The so-called quits rate among private-sector employees was unchanged at 2.4%. It slipped a notch to 2.1% if government workers are included. Job openings declined for most industries, though the biggest drop was in education. Educational employment is always hard to capture at the start and end of school years. Hurricane Harvey may have also had a negative impact at the end of the month.

The Dow Jones Industrial Average added 42.21 points or 0.18 percent to 22,872.89, the Nasdaq gained 16.3 points or 0.25 percent to 6,603.55, and the S&P 500 edged higher by 4.6 points or 0.18 percent to 2,555.24.



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