US rates plagued by uncertainty

Markets are waiting for a Fed steer on interest rates

The latest set of minutes from US Federal Reserve policy-makers have left markets with no clear idea as to the central bank's interest rate strategy.

The minutes of the 10 May meeting, when the benchmark rate was raised from 4.75% to 5%, showed that a number of options were discussed.

Federal Open Market Committee members considered raising the rate to as much as 5.25%, or even doing nothing.

US markets have see-sawed in recent weeks due to interest rate uncertainty.

May's 0.25 percentage point rise was the 16th in a row.

According to the FOMC minutes, members were uncertain about the risk from inflation.

They were worried about the inflation pressures created by surging energy and commodity prices.

Inflation watch

But they were also concerned about a potential slowing in the speed of US economic growth, as previous interest rate rises and a cooling housing market took effect.

The minutes left some market watchers unimpressed:

"It's very mixed and as ambiguous as I can recall," said Hugh Johnson, chief investment officer from Johnson Illington Advisors in New York.

"They may raise interest rates and they may not raise interest rates. They have concerns that inflation may be a problem but also have concerns about the economy."

Some analysts said that the minutes were "mildly hawkish" - showing that, despite the obvious uncertainty, Federal Reserve policy-makers were still worried about inflation and were willing to raise interest rates in order to contain it.

Last week the government reported that core prices, excluding food and energy costs, had risen 2.1% in the year to April, above the Federal Reserve's preferred inflation zone of 1-2%.

Many traders now think that the Fed is more likely to raise rates again at its next meeting on 28-29 June.