Investing.com - Federal Reserve policymakers said they continued to expect the U.S. economy to expand at an above-trend pace, prompting the need for further rate hikes, according to the minutes of the Fed's July meeting.
"Fed staff continued to project that the economy would expand at an above-trend pace," the minutes showed. "Members expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term."
In a sign of confidence on the strength of the U.S. economy, Fed policymakers raised their outlook on U.S. economy growth, citing stronger household spending.
"Relative to the forecast prepared for the June meeting, the projection for real GDP growth was revised up a little, primarily in response to stronger incoming data on household spending," the minutes said.
The Fed modestly downgraded its outlook on inflation, which was hurt by falling oil prices, but policymakers remained adamant that inflation would remain near the central bank's 2% objective.
"The staff forecast for total PCE price inflation in 2018 was revised down a little, mainly because of a slower-than-expected increase in consumer energy prices in the second quarter and a downward revision to the forecast for energy price inflation in the second half of this year," the minutes showed. "The staff continued to project that total PCE inflation would remain near the Committee's 2 percent objective over the medium term and that core PCE price inflation would run slightly higher than total inflation over that period because of a projected decline in consumer energy prices in 2019 and 2020."
International trade tensions, meanwhile, had "weighed" on market sentiment, prompting "notable" declines in some foreign equity markets, although the impact on domestic asset prices was modest, Fed members said.
The minutes gave traders further confidence in a September rate hike. The change of a hike at the next meeting rose to 96%, according to Investing.com's Fed Rate Monitor Tool. But the chance of a December hike edged down to 62.8% from 64.5%.
The Fed's plan to continue with rate hikes has recently drawn criticism from President Donald Trump. In an interview with Reuters on Monday, Trump said that he was “not thrilled” with Fed Chairman Jerome Powell for raising rates and added that the Fed should do more to help him to boost the economy.
The president also said he would criticize the Fed if it continues to raise rates.
This is not the first time Trump has called out the Fed for raising rates. When he did so in July, Powell stressed that the Fed operated independently of political considerations.
Trump nominated Powell to succeed former Fed Chief Janet Yellen earlier this year.
The minutes had little impact on today's indecisive market. The S&P 500 pinged higher right after their release, only to quickly fall back down to around the unchanged mark.