In a combined session of the Federal Open Market Committee (FOMC) and the Board of Governors of the Federal Reserve System, the manager of the System Open Market Account (SOMA), a meeting was held today to discuss domestic and foreign financial market developments and the Federal Reserve’s Balance Sheet. The FOMC released minutes documenting the meeting.
This meeting comes three weeks after an initial meeting in late April, where Federal Reserve officials doubted that they would be able to raise short-term interest rates by the next mid-June meeting due to low economic growth.
Those who attended the April policy meeting believed that the rise and fall of factors such as, job gains, unemployment, household spending, income, business investments, and energy prices all had an effect on the economy, according to the press release from the meeting. Fed officials are taking extra precaution before lifting interest rates to ensure that the economy is on track for growth, and that their goal for maximum employment and a 0.2 percent inflation goal is met.
“Economic growth had slowed during the winter months, in part reflecting transitory factors,” the meeting minutes said. “The pace of job gains had moderated, and the unemployment rate had remained steady, with a range of labor market indicators suggesting that underutilization of labor resources was little changed. Most participants expected that, following the slowdown in the first quarter, real economic activity would resume expansion at a moderate pace, and that labor market conditions would improve further.”
According to the meeting minutes, home values and equity prices increases likely raised households’ net worth, and the index of consumer sentiment in the University of Michigan Surveys of Consumers remained near its highest level since prior to the most recent recession.
Residential investment increased slowly for the first quarter while other indicators of housing-sector activity remained weak, the minutes say. Despite small gains in March, starts and building permits for single-family homes decreased during the first quarter. New home sales did not experience any significant change over February and March, while existing home sales edged up on net.
With the constant output of varied economic data, Fed officials are unsure of their next step with interest rate changes. Although job growth showed improvement for April and the jobless rate decreased, economic output indicators including, industrial production and retail sales, have remained unsatisfactory. This has caused many forecast outlets to adjust their estimates for the second quarter.
“A few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook to lead the Committee to judge that its conditions for beginning policy firming had been met,” the meeting minutes said. “Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility.”
View the full minutes report: FederalReserve.gov