Fed minutes show participants ready to rise rates, but waiting for data confirmation

The tone of the minutes reflected the tone of the Fed's June statement. While a minority of Fed members expressed concern about beginning to tighten rates prematurely, the interest rates will begin to rise as long as expectations for continued improvement are met. Most members didn't think they'd have this confirmation by July, but they expected it to be there by September.

The U.S. economy has continued to improve since the Fed's mid-June meeting, but a number of developments have added downside risk to both the economic and inflation outlook. In particular, the increased likelihood of a Greek exit from the euro area and the recent equity sell off in China have gone in exactly the direction that the Fed feared in these minutes. Moreover, while the minutes expressed some comfort that oil prices had stabilized and that import prices would soon too, this has been called into question by more recent events.

"As long as financial conditions remain relatively gentle and the job market continues to improve, they wont find it right time to give up on the liftoff story. However, the Fed will be cautious in the pace of rate hikes and should conditions deteriorate further it will hold off, but not indefinitely", says TD economics.