With US stock traders concerned the end of the bull market could be approaching, analysts are more worried about the risk of inflation, according to the US Federal Reserve's latest meeting minutes.

US President Donald Trump looks on as Jerome Powell, his nominee to become chairman of the US Federal Reserve, speaks at the White House in Washington, US, November 2, 2017. (File photos: VCG)

The US Federal Open Market Committee (FOMC) stressed the issue of imbalance in the meeting that concluded September 26. Meeting minutes are not released until October 18 after the meetings.

Many committee members believed it would be necessary to temporarily raise the federal funds rate above their assessment of its longer-run level in order to reduce the risk of a sustained overshooting of the committee’s 2 percent inflation objective. 

Otherwise, the committee feared an inflation risk posed by significant financial imbalances. 

A business insider confirmed to the People’s Daily on Thursday that the mention of an imbalance indicates the US is concerned about a bubble from overvalued US tech stocks.

Although the minutes reiterated the concerns of Fed officials about the performance of stocks, corporate bonds and other risky assets, the market and the Fed are still out of sync.

Inflation and labor market conditions are now key considerations for the Fed when it comes to interest rates adjustments.

The US unemployment rate fell to 3.7 percent in September, the lowest level since 1969.

Former Federal Reserve Chairman Alan Greenspan said this is the tightest labor market he had ever seen, suggesting the nearly 50-year low unemployment rate coupled with American corporations clamoring for workers will force up wages and inflation.

Former Fed chair Janet Yellen is supportive of US Federal Reserve Chairman Jerome Powell’s decision, saying that if the monthly increase of more than 150,000 jobs continues, the unemployment rate will further decline, which will put pressure on prices and wages. It is necessary to raise concerns about rising inflation. The continued decline in the unemployment rate may reflect unsustainable economic growth and a more aggressive rate hike as inflation rises. Yellen believes that US President Donald Trump’s recent public criticism of the Fed is unwise.

Source: kitco.com

US Fed officials are not worried about a potential recession lurking in the corner. They are considering further interest rate hikes, and may even temporarily exceed the target level. 

As a result, there might be rise in yields and the widening of global monetary policy divergence.

In some way, the meeting minutes may boost market expectations. 

Even though the US stock market tumbled recently, investors believe that the US Fed will raise interest rates again in December. This will suppress the performance of gold.

Cover image: The Federal Reserve headquarters in Washington September 16 2015.