Fed officials see June rate hike as unlikely: minutes

Wed May 20, 2015 10:12pm EDT
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By Michael Flaherty and Howard Schneider

WASHINGTON (Reuters) - Federal Reserve officials believed it would be premature to hike interest rates in June even though most felt the U.S. economy was set to rebound from a dismal start to the year, according to minutes from their April policy meeting released on Wednesday.

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.   Continued...

The United States Federal Reserve Board building is shown behind security barriers in Washington October 28, 2014. REUTERS/Gary Cameron