Fed concerned about Greece and China

Wednesday, Jul 08 2015

Federal Reserve officials in June saw the economy moving toward conditions that would support an interest-rate increase, while also expressing concern about weak consumer spending and risks from China and Greece. Members of the Federal Open Market Committee “saw economic conditions as continuing to approach those consistent with warranting a start” to interest-rate increases at some point, according to minutes of June 16-17 meeting released Wednesday in Washington. All members but one “indicated that they would need to see more evidence that economic growth was sufficiently strong.”

Fed officials in June forecast they would raise rates twice this year, while lowering their outlook for subsequent increases. Since then, global markets have been shaken by the rising risk of a Greek exit from the euro and a rout in Chinese stocks. The minutes showed several Fed officials at the meeting “mentioned their uncertainty about whether Greece and its official creditors would reach an agreement and about the likely pace of economic growth abroad, particularly China and other emerging market economies.”

Many members expected the economy to be near full employment by year-end if growth progressed as they expected. Officials in June expected the unemployment rate to average 5.25% in the final three months of the year. The minutes also showed officials were cautious about the economic outlook. Among their concerns were lingering consumer caution, and drags on investment and exports resulting from lower energy prices and a stronger dollar.

Data did not have any major impact on the markets. Euro is currently being traded few points above 1.1060 level, Sterling is around 1.5360 area, while Aussie is around 0.7430 level.

More in this category: « Osborne Cuts U.K. Company Tax Aussie higher on Australian job data »