Federal Reserve policy makers debating their outlook for interest rates last month expressed concern that the fall in commodity prices and the rout in financial markets increasingly posed risks to the U.S. economy. “Participants judged that the overall implications of these developments for the outlook for domestic economic activity was unclear but they agreed that uncertainty had increased,” according to minutes of the Federal Open Market Committee’s Jan. 26-27 meeting released Wednesday in Washington. “Many saw these developments as increasing the downside risks to the outlook.”
The minutes go into more detail than the FOMC’s statement on policy makers’ concerns about the risks to the U.S. economy. While voting members “generally agreed” they couldn’t assess the balance of risks to the outlook in the statement, officials “observed that if the recent tightening of global financial conditions was sustained, it could be a factor amplifying downside risks,” according to the report.
“While participants continued to expect that gradual adjustments in the stance of monetary policy would be appropriate, they emphasized that the timing and pace of adjustments will depend on future economic and financial-market developments and their implications for the medium-term economic outlook,” the minutes said. Officials agreed that incoming labor-market indicators had been “encouraging,” while data on spending and production were “disappointing.”
“A number of participants were concerned about the potential drag on the U.S. economy from the broader effects of a greater-than-expected slowdown in China” and other emerging-market economies, the minutes said. Policy makers noted that the further decline in energy prices and an additional appreciation of the dollar “likely implied that inflation would take somewhat longer than previously anticipated to rise” to 2 percent.
Source: Bloomberg.com
