Fed doubts data will support June rate liftoff

• U.S. Federal Reserve officials last month didn’t expect to raise rates at their next meeting in June even as they concluded that a first-quarter economic slowdown was unlikely to persist, minutes of the meeting show.

Many of the participants “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,” according to minutes of the April 28-29 Federal Open Market Committee session released Wednesday in Washington.

That sentiment outweighed the opinion of “a few” members who said they anticipated the economy would be ready for a June liftoff, the minutes showed. At the same time, officials didn’t rule out the option of tightening at that time.

The minutes also confirmed the FOMC’s statement in April that it expects the economy to return to a “moderate pace” of growth after a first-quarter slowdown. Since the meeting, payrolls figures have improved, while weaker-thanforecast data on manufacturing and retail sales prompted economists to mark down projections for second-quarter economic growth.

Officials are weighing the timing of the first interestrate increase since 2006. Most expect to tighten later this year and have said they could move at any meeting from June onward, depending on the outlook for jobs and higher inflation.

Gross domestic product rose just 0.2 per cent at an annual pace in the three months through March, versus 2.2 per cent in the fourth quarter of 2014. The FOMC in April said “economic growth slowed during the winter months, in part reflecting transitory factors.”

The minutes revealed details of the committee’s discussion about how much of the slowdown resulted from causes that are likely to fade. Those included severe winter weather, a labour dispute at West Coast ports, and a “pattern” of weak first quarter economic data over a number of years.

Still, officials were surprised Americans weren’t spending the windfall from lower gasoline prices, “highlighting the possibility of less underlying momentum in consumer expenditures than participants had previously judged.”

Some participants “expressed particular concern about this prospect” because their forecast for a moderate expansion depended on a scenario where household spending grows “robustly despite softness in other components of aggregate demand.”

A strong dollar, which makes U.S. goods more expensive in overseas markets, was one reason a number of officials thought recent weakness in economic growth could persist.

Even though the dollar’s gains have slowed, its impact on exports could be “larger and longer-lasting than previously anticipated,” the minutes state.