WASHINGTON, D.C.: Federal Reserve policymakers were broadly worried about the threat of slower global growth to the US economy, the minutes from their March 15 to 16 meeting showed on Wednesday (Thursday in Manila).
As they decided against an interest rate hike at that meeting, several also cautioned against an increase in April, saying it would signal a sense of urgency over US monetary conditions that “they did not think appropriate,” the minutes said.
The minutes showed most of 17 participants in the Federal Open Market Committee (FOMC) policy review were comfortable with the pace of growth in the US economy, agreeing it will continue to expand at a moderate rate over the medium term with only a “gradual” tightening of monetary conditions.
However, the minutes said, “participants generally saw global economic and financial developments as continuing to pose risks to the outlook for economic activity and the labor market in the United States.”
Some pointed to the turmoil early in the year in world financial markets and argued that the underlying reasons for that had not gone away.
They were also worried about slow domestic business investment and limited capital spending plans in the corporate sector.
The FOMC panel, led by Fed Chair Janet Yellen, was more generally split on whether recent jobs gains and some signs of stronger inflation were enough to increase the Fed’s benchmark federal funds rate. Some saw the country near full employment and at risk of a surge in prices, while others saw signs of continued weaknesses.
But most preferred to remain cautious and hold off on rates, noting that with the federal funds rate barely above zero at 0.25 percent to 0.50 percent, the Fed has limited choices to help the economy if it weakens.
Many of the group noted that the FOMC “continued to have little room to ease monetary policy through conventional means if economic activity or inflation turned out to be materially weaker than anticipated,” the record said.
On the other hand, they “could raise rates quickly if the economy appeared to be overheating or if inflation was to increase significantly more rapidly than anticipated.”
Of the 10 voting members of the group, nine backed keeping policy unchanged while one, Esther George, dissented, calling for a rate increase then and there.
George argued, according to the minutes, that despite the problems abroad and unusual volatility in global markets, the US economy had already closed in on the FOMC’s own targets for raising rates.