Federal Reserve policymakers expressed uncertainty last month about the outlook for the U.S economy because of a sharp slowdown in job growth and the threat posed by a potential vote in Britain to leave the European Union.
Minutes of the June 14-15 Fed policy meeting released Wednesday show a consensus to delay further interest rate hikes until data could show whether an anemic U.S. hiring report for May was merely a temporary blip.
“Almost all participants judged that the surprisingly weak May employment report increased their uncertainty about the outlook for the labor market,” the minutes said.
Policymakers also agreed that they needed to await the outcome of the British vote. Days later, Britain ended up voting to abandon the EU – a move that ignited turbulence in financial markets and has likely deepened caution among Fed policymakers. Many economists think the Fed will raise rates at most one time in 2016, probably near year’s end.
At its meeting last month, the Fed voted 10-0 to leave its key policy rate unchanged in a range of 0.25 percent to 0.5 percent. It’s been at that level since December, when the Fed raised the rate from a record low near zero.
Prospects for further rate hikes dimmed last month even before the Fed met after the government said employers added just 38,000 jobs in May. It was the fewest monthly total in five years, and it followed a tepid gain of 123,000 in April.
The June jobs report, to be issued Friday, is expected to show a gain of 160,000 jobs. A solid jobs report could help assuage anxieties about the U.S. economy and renew speculation about when the Fed might resume raising rates.