US Federal Reserve continues to be under pressure

Minutes of the FOMC meeting that took place in late July showed members of the US Federal Reserve were cautious in their belief towards hiking interest rates for a second time since initially setting the trend in motion last year in December. Although there was a considerable amount of debate whether the US economy was fit enough to sustain a fresh hike, it was decided that more certainty in terms of members full agreement on the timing of the move would be necessary.

We saw remarks earlier in the week from New York Fed President William Dudley emphasising a number of points directly showcasing the strength of the economy whilst going on further to say an interest rate hike was still on the cards at the Fed's next FOMC meeting in September.

But as surprising as it may seem, markets hardly reacted to the enticement by Dudley instead remaining relentless in its view that the current progression from other central banks around the world in extending bond-buying programs while simultaneously exploring the "new" lower bounds of interest rates underneath zero percent was slowing down the Fed's ambitions.      

#Fed minutes this week may show why Yellen & co kept timing vague on next rate increase https://t.co/gw5pirYkWY pic.twitter.com/NmnIWAwiNv

— Bloomberg Economics (@economics) August 16, 2016

Inasmuch as the economic indicators relied upon by the Federal Reserve to make a decision constantly show positive signs within the US economy the issue of enforcing an interest rate becomes a different matter altogether with the alignment of countries economic policies over recent decades making pulling the trigger harder than it looks.

It requires a consensus from all other nations in following the direction of the move although not necessarily to the exact same timing as the other. If we looked at the current global monetary policy stance that's dominating headlines, it doesn't appear wise to apply discretion in the contrary direction which places the Fed's expected trajectory under scrutiny.

Should the Fed see a divergent policy appropriate it would mark the first signs of an uncoupling of a global understanding where the economic decision taken by an individual country no longer influenced by its impact or effects on its counterparts.

Or contrary to this we'll see a less stringent pathway of interest rate hikes with an eventual outcome of the Fed buckling under the pressure of a joint global effort to exploit monetary policy to its withers end till the point of financial catastrophe.    

The longer the Fed stalls hiking rates the more likely it'll fall prey to the second scenario because with every meeting that passes with no action registered a wave of doubtfulness will fill the thoughts of market participants who've already become accustomed to "easy" money to drive up asset prices higher and eager to test central bankers commitment further.