Fed policymakers agree Donald Trump's fiscal boost poses inflation risk

Gold price ended 3-year series of annual declines

Gold price ended 3-year series of annual declines

In the hours before the Fed minutes were published, the interest rate banks charge each other to borrow U.S. dollars for three months rose above 1 per cent for the first time since May 2009.

The stronger dollar and higher interest rates usually create bearish market sentiment in gold, as the precious metal is denominated in dollars and thus hard to compete with assets yield. And Fed economists said that investors seemed to be expecting the same.

Janet Yellen, chair of the US Federal Reserve.

The Fed said in its minutes, which were released Wednesday, that its anticipated path of interest rates rose significantly following Trump's presidential win.

While Republican nominee Donald J. Trump's electoral victory in the November 8 presidential election shocked many across these United States and around the world, investors in America's stock markets reacted positively with the Standard and Poors (S&P) 500, Dow Jones Industrial Average and NASDAQ reaching record levels within the next two weeks.

Goldman Sachs forecasts a fiscal expansion of about 0.5 per cent of GDP in late 2017 and early 2018.

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Despite sounding more upbeat about the economy, the meeting's minutes said Fed officials "emphasized their considerable uncertainty about the timing, size and composition of any future fiscal and other economic policy initiatives" by Congress and the White House.

It added though that "a more expansionary fiscal policy might raise aggregate demand above sustainable levels, potentially necessitating somewhat tighter monetary policy than now anticipated".

The nation's central bankers also saw some possible negatives clouding the economic outlook. At the same time, several members of the policy-making body said a further rise in the value of the dollar "might continue to hold down inflation".

Yellen told reporters, "I wouldn't want to speculate until I were more certain of the details and how they would affect the likely course of the economy".

Although the minutes steered clear of mentioning Trump, when it came to risks, "many" participants mentioned an increase in uncertainty "associated with fiscal, trade, immigration, or regulatory policies as a factor influencing their judgments". The next FOMC meeting, and the first one of 2017, will be January 31-February 1.