FOMC meeting minutes: Federal Reserve will hike interest rates in September, says Citi

NEW YORK: Although the market is still divided on whether or not the Federal Reserve will make its first rate hike in September, analysts at Citi are pretty dead set on it.

After July's Federal Open Market Committee ( FOMC) meeting minutes were released, many investors and traders interpreted them as dovish, with the probability of a rate boost next month sliding to 36 per cent from about 50 per cent earlier in the day. The team at Citi, led by William Lee, says this is wrong and that the market misinterpreted the minutes.

The minutes were from a meeting that took place three weeks ago, when recent economic data points had been disappointing. Since then, data has come in stronger, with retail sales getting revised higher and housing and construction coming in strong. Furthermore, Citi saw something specific in the minutes which it interpreted as hawkish. The increased prominence of financial stability considerations in the FOMC discussion is a very hawkish signal that markets apparently ignored with the release of the July minutes.