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Montevideo, November 18th 2018 - 22:49 UTC

“Slack of US labor market” keeping the Fed from raising interest rates

Thursday, August 21st 2014 - 07:31 UTC
Full article 4 comments
Many Fed members pointed to the millions of workers who have been out of work for extended periods or who are unable to find full-time employment. Many Fed members pointed to the millions of workers who have been out of work for extended periods or who are unable to find full-time employment.
“Labor market conditions had moved noticeably closer to those viewed as normal in the longer run,” revealed the Fed's minutes “Labor market conditions had moved noticeably closer to those viewed as normal in the longer run,” revealed the Fed's minutes

The US Federal Reserve hinted that a surprisingly strong jobs market recovery could lead it to raise interest rates earlier than it had been anticipating. At the same time, most Fed officials wanted further evidence before changing their view on when rates should rise, according to the minutes from the central bank's July 29-30 meeting.

 “Labor market conditions had moved noticeably closer to those viewed as normal in the longer run,” the minutes said, adding that policymakers “generally agreed” the job market was healing faster than they had expected.

The Fed had said in its policy statement following the July meeting that there was “significant” labor market slack, but the minutes showed many members of its policy-setting panel thought this characterization “might have to change before long.”

The central bank has held benchmark rates near zero since December 2008, but has signaled it would likely begin to move them up some time next year.

Yields for 10-year Treasury notes moved higher, while the dollar firmed against the Euro and the yen after release of the minutes. Interest rate futures continued to point to a first rate hike in July of next year, although the chances of an earlier move ticked slightly higher.

Most Fed policymakers felt any change in their view on when to start raising rates “would depend on further information on the trajectories of economic activity, the labor market and inflation,” the minutes said.

Some officials worried a drop in US GDP in the first quarter might signal the economy was weaker than believed, despite the widely held view the decline was largely due to bad weather and other temporary factors. And several felt the low level of inflation warranted an easy monetary policy stance.

Most of the debate, however, centered around the amount of slack in the labor market, with many officials pointing to the millions of workers who have been out of work for extended periods or who are unable to find full-time employment.

The Fed has pledged to keep interest rates near zero for a “considerable” period after it wraps up a bond-buying stimulus program in October.

In a slight shift from the views expressed at the Fed's June policy meeting, the minutes said “most” Fed officials supported re-investing the maturing securities in the central bank's vast portfolio until sometime after its first rate hike. The minutes of the previous meeting said only that “many” supported this approach.

The latest minutes also showed officials had largely agreed on a framework for eventually raising rates, with almost all of them agreeing it would be appropriate to retain the overnight federal funds rate as their key target.

Categories: Economy, Politics, United States.

Top Comments

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  • ChrisR

    “Most of the debate, however, centered around the amount of slack in the labor market, with many officials pointing to the millions of workers who have been out of work for extended periods or who are unable to find full-time employment.”

    At last somebody has realised that the “Official” figures are misleading to say the least.

    Just like in the UK, many people have given up trying to find a proper job and don't want to work for McD's.

    Aug 21st, 2014 - 12:08 pm 0
  • 4n conTroll

    Oh boy they are building yet another HUGE bubble.

    These northerners never learn.

    @1

    Well, isn't that what YOU wanted? A capitalist UTOPIA? You got it!

    https://finance.yahoo.com/news/how-your-boss-will-run-your-life-in-a-few-years-165905475.html?.tsrc=mobifone

    There you go.... ENJOY IT!

    Aug 21st, 2014 - 05:19 pm 0
  • ChrisR

    TTT

    Do you ever READ the posts you criticise?

    BTW, have you answered my second question yet: you never answered my first about what I wanted to see happen to Argentina?

    Just try growing up and joining in the debate for once.

    Aug 21st, 2014 - 07:02 pm 0
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