|
 The central bank debated whether a slew of disappointing data,
including weak consumer spending, signaled a temporary slump or
evidence of a longer-lasting slowdown, with most participants
agreeing economic growth would climb to a healthier pace and the
labor market would strengthen.
The U.S. economy grew an anemic 0.2 percent in the first quarter,
according to the most recent government data.
The minutes from the April 28-29 policy-setting committee meeting
also highlighted the quandary the Fed faces in trying to avoid the
market volatility tied to a rate hike while sticking to its
meeting-by-meeting guidance on when that move will come.
With an increased amount of uncertainty and signs of softness across
the economy, the minutes showed Fed officials pushing the prospect
of a rate hike later into the year.
"Many participants, however, thought it unlikely that the data
available in June would provide sufficient confirmation that the
conditions for raising (interest rates) had been satisfied ...," the
minutes said.
 U.S. Treasury prices were largely unchanged after the release of the
minutes, while short-term interest rate futures and TIPS inflation
break-even rates held firm, as did stocks.
Fed officials flagged a number of concerns including disappointment
that falling oil prices did not spur consumer spending as much as
had been hoped. They also cited economic worries in China and
Greece.
They also were troubled by the behavior of the bond market, which
Fed Chair Janet Yellen spoke about earlier this month. The minutes
show central bank officials believe bond market volatility was
higher now because of high-frequency traders, decreased inventories
of bonds held by broker-dealers, and elevated assets of bond funds.
To avoid a disruptive spike in long-term bond rates, Fed officials
discussed whether the central bank should better telegraph a rate
hike in post-meeting communications. But most said keeping to the
meeting-by-meeting policy was best for now.
The "taper tantrum" of 2013, when emerging-market currencies and
stocks plunged en masse on the suggestion that Fed bond-buying could
be reduced, has loomed over the central bank as it nears its
so-called rate lift-off.
[to top of second column] |
FRIDAY SPEECH
The minutes largely reflected the Fed's April policy statement,
which pointed to economic softness but described the slow growth as
reflecting, in part, transitory factors such as bad weather and a
U.S. port disruption.
Investors now will focus on a Yellen speech on Friday for signs of
whether she believes the economy is back on track, or if she nods to
the latest batch of weak data.
Out of 62 economists polled by Reuters, 50 expect the Fed to hike
rates in the third quarter. Most policymakers have stuck to the
mantra that the central bank will watch the data and assess on a
"meeting-by-meeting" basis whether to raise rates, and have
telegraphed September as a likely date for the first increase.
A recent pull-back in the strength of the dollar and higher oil
prices both received attention in the minutes. A lower greenback and
higher energy costs are key factors in moving inflation higher and
prompting the Fed to bump up rates in tandem with rising prices
across the economy.
The Fed has repeatedly said it will not raise rates until it is
"reasonably confident" that prices are moving toward its 2 percent
target. Wednesday's minutes noted that market-based inflation
measures, while still low, had risen slightly.
(This story has been corrected to change growth rate to 0.2 percent
from 0.1 percent in third paragraph)
(Reporting by Michael Flaherty and Howard Schneider; Additional
reporting by Jonathan Spicer in New York; Editing by Paul Simao)
[© 2015 Thomson Reuters. All rights
reserved.]
Copyright 2015 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
