Releasing the minutes of its March meeting, the Fed said officials had discussed the moderation of gross domestic product – the broadest measure of the economy – in the first quarter, even as the job market continued to improve.
The minutes were drawn up before the latest official US jobs report recorded a sharp decrease in the rate of hiring. Last Friday, the Bureau of Labor Statistics reported that the US economy added just 126,000 new jobs in March, barely half the number economists had expected and ending a 12-month streak of monthly gains of over 200,000 jobs.
The latest job figures may have added weight to those Fed officials seeking a delay of in interest-rate hikes.
“Several participants judged that the economic data and outlook were likely to warrant beginning normalization at the June meeting,” the minutes said. “However, others anticipated that the effects of energy price declines and the dollar’s appreciation would continue to weigh on inflation in the near term, suggesting that conditions likely would not be appropriate to begin raising rates until later in the year, and a couple of participants suggested that the economic outlook likely would not call for liftoff until 2016.”
The lingering impact of a frigid winter and lower oil prices leading to job cuts in the booming domestic oil market may have impacted the numbers. New York Federal Reserve president William Dudley said on Wednesday that he was not overly concerned with one month’s jobs report but that the economic growth was slowing.
“Clearly the economy is growing slower and there’s less pressure on the labor market,” Dudley said during an event presented by Thomson Reuters. Dudley said it would be “reasonable to expect that the timing of the Fed’s first rate hike might be a little further off in time”.
In a note to investors Paul Ashworth, chief US economist at Capital Economics, said it was now clear that Fed officials were split on whether to begin hiking the fed funds rate in June or to wait until some time in the second half of this year.
“The weak March payroll figures may have tipped the balance on the FOMC [Federal open markets committee] in favour of waiting until September. But perhaps not if Fed officials chalked it up to the same transitory factors, such as the unseasonably cold weather, that some of them believe can explain the softness in first-quarter spending,” he wrote.
US stock markets shrugged off the news and were largely unchanged after the release of the minutes.
This article was written by Dominic Rushe in New York, for theguardian.com on Wednesday 8th April 2015 19.26 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010