In the Minutes of their July 28 – 29 Federal Open Market Committee (FOMC) meeting, Fed officials outlined their decision to hold off on raising interest rates, noting that most members believed the conditions for policy firming were not yet met, but were “approaching that point.” In the July and previous meetings, FOMC members expressed a desire to see “some further improvement” in the labor market, as well as “reasonable confidence” that inflation would return to 2% over the long run.
In the July meeting minutes, participants agreed that labor markets had improved further, citing increases in employment and job openings. Despite declines in the labor-force participation rate in June, several participants cited reports from business contacts in their districts, which pointed to signs of job gains and strong labor markets, with participants citing anecdotal evidence regarding firms having difficulty hiring and retaining workers. Several participants however did not share this view, citing the high number of discouraged job seekers and involuntary part-time workers.
In assessing whether economic conditions had improved sufficiently enough to firm monetary policy, the minutes noted that many members thought that labor market underutilization would be “largely eliminated if economic activity evolved as expected.” Conversely, some committee members expressed concern that the rate of full employment could be lower than previously thought, citing the lack of evidence supporting wage growth.
Despite running below current objectives, the Committee believed that incoming economic data bolstered their belief that inflation will return to the 2 percent objective in the long run.
With regard to the foreign economic outlook, at the time of the July meeting participants generally viewed the risks from Greece as having diminished somewhat, but the country faced many challenges that would limit its economic progress over the near term. In China, the recent stock market declines had seemed to have limited implications for its economic growth. However, the Committee noted that “a material slowdown in Chinese economic activity could pose risks to the U.S. economic outlook.”
Read the FOMC minutes.