But they indicated that their decisions could play out over “coming months” and that they must review a range of positive data before acting again. Many economists believe the Fed may only hike its benchmark interest rate just once this year.
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BNPP: Today sees the release of the June FOMC minutes and, while the meeting took place before the United Kingdom referendum, we expect the minutes to highlight a range of concerns and uncertainties keeping the Committee in check, consistent with yesterday’s speech by New York Fed President Dudley, who noted a weaker than expected investment outlook.
In the last policy meeting, Yellen stated several reasons for maintaining the status quo.
Britain’s decision comes at time when the Fed has grown more sensitive to global events, postponing what seemed to be imminent rate increases twice since last summer because of events far from USA borders.
The main data in the coming week is therefore likely to be USA non-farm payrolls numbers due on Friday, which are expected to show employers in the world’s largest economy added 180,000 jobs last month, a preliminary Reuters poll found, after May’s surprisingly weak reading of just 38,000.
They said they wanted to see more data to determine if May’s paltry job growth of 38,000 was an anomaly or a sign of a labor market slowdown.
Most participants thought inflation would move closer to the FOMC’s longer-run target of 2.0%, pointing to a pick-up in wage growth and recent rises in oil prices.
US services industry activity hit a seven-month high in June as new orders surged and companies hired more workers, suggesting the economy regained speed in the second quarter.
“Many participants commented that the level of the federal funds rate consistent with maintaining trend economic growth-the so-called neutral rate-appeared to be lower now or was likely to be lower in the longer run than they had estimated earlier”, the minutes said. All told, economists expect the Labor Department to report a modest recovery, with employers adding 180,000 jobs in June.
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The minutes show Fed policymakers were also concerned about the Brexit vote. Since the vote, stocks have been volatile on Wall Street, while investors have driven up safe-haven assets such as gold and yields on long-term US debt have fallen to record lows. Policymakers also cited a severe slowdown in hiring by USA employers as a reason for leaving interest rates steady last month, the minutes showed. And their median projection was that the rate will be just 2.4% at the end of 2018, down from their previous estimate of 3%. We also look for an increasing acknowledgement of the persistence of the structural headwinds constraining growth, which has underpinned the dovish revisions to the projected policy path.
