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Uncertainty makes US Fed hold off interest rate hike

Fed officials disagreed in their judgment of employment, inflation, and pace of interest rate hikes in the future Photograph: (Getty)

Reuters Washington, United States Jul 07, 2016, 03.55 AM (IST)
The Federal Reserve of the United States decided to keep interest rates unchanged in its June policy meeting due to uncertainty in the labour market and the United Kingdom's referendum on membership in the European Union (EU), minutes of the Fed's latest monetary policy meeting showed on Wednesday.

Most (members) judged it appropriate to avoid overweighting one or two labour market reports in their consideration of the economic outlook, but they indicated that recent slowing in payroll employment gains had increased their uncertainty about the likely pace of improvements in the labour market going forward, said the minutes of the Fed's June 14-15 meeting.

The UK vote was the other consideration for the US central banking system to hold off on raising interest rates.

Members noted the considerable uncertainty about the outcome of the vote and its potential economic and financial market consequences, said the minutes.

The minutes also showed that Fed officials disagreed in their judgment of employment, inflation, and pace of interest rate hikes in the future.

Some officials judged that labour market conditions were at or close to the maximum employment, and some moderation in employment gains was to be expected, while others observed that there could be a possible downshift in the pace of improvement in the labour market, in view of the recent slow job gains, decline in labour participation rate and no reduction in part-time employees.

In regard to inflation outlook, some officials observed that core inflation had risen, while several others continued to see downside risk to inflation.

Some officials emphasised that it should not be delayed too long to further raise its interest rate with the employment and inflation close to the central bank's targets, while a couple of officials noted that they would need to be more convinced that the economy is strong enough and that inflation is moving closer to the target.

(Reuters)
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