- FOMC minutes
The US economy's weakness in the beginning of the year persuaded most Fed policy makers that the economy would not show enough strength to justify hiking the benchmark interest rate in June. Yet, officials said that the slow start to the year was mostly triggered by temporary factors like harsh winter weather and disputes at West Coast ports. Fed officials received a mixed bag of economic data. The Commerce Department reported last month that the world's number one economy grew at a meagre 0.2% annual rate in the first quarter and many analysts predict that estimate to be revised down. Even though job creation accelerated in April and the unemployment rate dropped to 5.4%, several measures of economic output, including industrial production and retail sales, have been disappointing.
However, central bankers expected a rebound in the coming months as the US Dollar weakened, supporting exports, according to the April policy meeting minutes. While the minutes showed a rate increase is not completely off the table, only a few Fed officials thought they would have enough confidence to begin raising interest rates at the June 16-17 meeting. Market participants are increasingly expecting the Fed to increase rates in September or beyond. Fed's minutes also showed that officials discussed whether the central bank should increase its 2% annual inflation target.
© Dukascopy Bank SA