Fed policy meeting minutes show concern over China
The minutes of the Federal Reserve’s latest policy meeting were released on Wednesday. Many Federal Reserve policymakers saw increased risks facing the US economy as they assessed the market turmoil that has erupted in 2016 amid plunging commodity prices and confusion over China’s currency policies.
The FOMC minutes for its January meeting showed that Fed policymakers were wary of rushing to premature conclusions about the implications of the month’s financial turbulence, but most agreed that the outlook had become more clouded and uncertain.
While participants continued to expect that gradual adjustments in the stance of monetary policy would be appropriate, they emphasized that the timing and pace of adjustments will depend on future economic and financial market developments and their implications for the medium-term economic outlook.
One of the main concerns amongst Fed policymakers was China. They were concerned about the potential drag on the US economy from the broader effects of a greater-than-expected slowdown in China, based on recent data indicating this.
Meanwhile, Chinese inflation data released today showed consumer prices rose in January, an encouraging sign for the world’s second largest economy in a month characterised by turbulence in its financial markets.
The consumer price index rose by 1.8 per cent year-on-year in January, from 1.6 per cent in December 2015. However, CPI continues to trail Beijing’s target of around 3 percent. Most forecasts were for a rise to 1.9 per cent in January.
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