Members of the Federal Reserve were divided over whether to raise interest rates even before the Brexit vote injected more uncertainty into markets, according to an account of the central bank’s June monetary policy meeting released Wednesday.
Minutes from the meeting indicated that that the Fed agreed unanimously on waiting to see the economic fallout from the United Kingdom referendum before making any big decisions about setting rates.
But an unspecified number of the committee thought that further short-term interest rate increases “should not be delayed too long,” given that unemployment has fallen and inflation has risen.
Others wanted further confirmation that inflation is really rising toward the Fed’s 2 percent target. Several worried that the recent slowdown in job gains could become a larger problem, or that falling inflation expectations could translate into lower prices for goods and lower wages. This latter group of unnamed members also thought the Fed could always raise rates later if inflation soared, but it can’t necessarily lower rates if the economy falters, because rates are already close to zero.
Of particular concern to all the Fed officials was the May jobs report that showed only 38,000 new jobs in the month. They worried about whether it was more than a one-off piece of bad news, raising the importance of Friday’s jos report for June for setting the Fed’s course for the rest of the year.
The minutes released Friday were from the June 14-15 meeting, which took place a little more than a week before the United Kingdom voted to leave the European Union on June 23. That event roiled world markets, sent stocks lower and pushed up the dollar.
