Fed awaiting evidence global chill not knocking U.S. off track

Thu Oct 8, 2015 4:46pm EDT
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By Jason Lange and Howard Schneider

WASHINGTON (Reuters) - The U.S. Federal Reserve thought the economy was close to warranting an interest rate hike in September but policymakers wanted firmer evidence a global economic slowdown was not knocking America off course.

The minutes from the Sept. 16-17 meeting released on Thursday pointed to a deeply cautious Fed even before subsequent economic data showed a sharp slowdown in hiring by U.S. employers.

"Most" policymakers, according to the minutes, thought the Fed's first rate hike in a decade should still come this year and that financial market turmoil had not "materially altered" the outlook for the U.S. economy.

At the same time, U.S. central bankers appeared unsettled and discussed at length the possibility that the China-led slowdown could weigh on America.

"The committee decided that it was prudent to wait for additional information," the Fed said in the minutes, referring to its policy-setting Federal Open Market Committee.

The Fed surprised much of Wall Street by keeping interest rates unchanged at the September meeting, and many analysts expected the minutes to show the decision was a close call.

However, while some central bankers at the September meeting said the U.S. labor market was at full strength and Richmond Fed President Jeffrey Lacker was ready to hike right then and there, worries about a global economic chill clearly extended throughout the central bank.

In discussing the economy's health, "many acknowledged that recent global economic and financial developments may have increased the downside risks to economic activity somewhat," the minutes said.   Continued...

The Federal Reserve building in Washington September 1,  2015.  REUTERS/Kevin Lamarque