Investing.com – Federal Reserve policymakers supported further increases in interest rates as the pace of U.S. economic growth continued "above trend," but concerns grew over the impact of trade tensions on business sentiment, according to the minutes of the Fed's June meeting.
"Participants generally expected that further gradual increases in the target range for the federal funds rate would be consistent with solid expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term," the Fed said in the minutes.
The Fed's case to continue tightening monetary policy was strengthened by a continued uptick in inflation and a solid labor market, despite concerns about the impact of rising trade tensions on spending and business sentiment.
"Most participants noted that uncertainty and risks associated with trade policy had intensified and were concerned that such uncertainty and risks eventually could have negative effects on business sentiment and investment spending," the Fed said.
The minutes also showed that Fed policymakers expected that "inflation was on a trajectory to achieve the Committee's symmetric 2 percent objective on a sustained basis."
The Fed's recent addition of "symmetric" to its language concerning the inflation target is widely viewed as a signal that central bank policymakers are comfortable with inflation running above its target.
Ahead of the crucial nonfarm payrolls report due Friday, the Fed minutes showed that policymakers continued to expect the labor market conditions to strengthen, supporting a further decline in the unemployment rate.
"Participants generally expected the unemployment rate to remain below, or decline further below, their estimates of its longer-run normal rate," the Fed's minutes showed.
Stocks took a sell-the-news stance towards the minutes. The S&P 500, Dow and Nasdaq Composite all fell after the release of the minutes at 2:00 PM ET (18:00 GMT). But buyers soon returned, pushing the indices closer to the gains seen before the mintues were published.
The release of minutes comes after the Fed, as was widely expected, raised interest rates by a quarter point at its June 12-13 policy meeting and lifted its projection for the number of rate hikes in 2018 up to four from three previously, though the move was driven by just one policymaker changing their projection.
It was the seventh rate hike since late 2015, when the Fed first started to raise interest rates from near zero.
Traders are currently pricing in a 76% chance of a rate hike in September, according to Investing.com’s Fed Rate Monitor Tool. Odds of a fourth rate hike by December are seen at about 48%.