Conditions for Fed liftoff “approaching”

At the July meeting, many Fed participants felt confident that hike would be supported by sustained growth and further improvements in the labor market.

However, some participants said that the incoming information had not yet provided grounds for such confidence and that this condition for policy normalization would not be met soon. 

"The FOMC minutes indicated that the liftoff date is approaching. However, the text offered little guidance beyond that. One thing is clear: the decision to hike or not to hike will come down to members' confidence that inflation will reach 2% in the medium term", says Societe Generale. 

This group of sceptics noted that the reduction of slack has had only limited effect on wage and prices to date, raising uncertainty about the inflation process. It also pointed to downside risks for inflation which include further declines in commodity prices and possible further appreciation of the dollar. 

Importantly, this group appears to be a minority among both participants and current voters.