Fed minutes indicate Fed is divided, likely still on hold

Federal Reserve Chairman Janet Yellen answers a reporter's question during a news conference in Washington December 16, 2015.
Jonathan Ernst | Reuters

The minutes from the Fed's July 26 and 27 meeting were released, and no surprise — they reveal a deeply divided Fed. Stocks were little changed on the release of those minutes, and with good reason: The markets already believed that a rate hike in September would be highly unlikely. The minutes only served to reassure them.

The key issues are how the Fed feels about inflation, jobs and the foreign markets.The markets don't believe the Fed will move in September because the Fed has clearly telegraphed its concerns that inflation is below its 2 percent target.

On jobs, the Fed acknowledged job growth was strong but second-quarter gains were noticeably slower than in the first quarter. On the international front, the Fed noted global risks, particularly from Brexit, still remained.

Bond yields and the dollar both moved down. Although "a couple" members indicated they wanted to raise rates, the market chose to focus on the line that the members thought it "prudent" to accumulate more data before acting.

So, where does this leave us?

It leaves us with Janet Yellen's speech at Jackson Hole on August 26. But the one thing we know about Yellen is that when in doubt about a rate hike, she is always a dove. There is clearly doubt in the minutes, so the chances are she will remain in the cautious camp and will again strike a dovish tone, and the market's muted reaction indicates that.

Bottom line: The "wait and see" theme is still dominant over at the Fed, and that keeps traders believing that a rate hike is still further down the road.