Directors at the Federal Reserve’s regional banks during meetings in June and July said the U.S. expansion “slowed somewhat in recent months” and predicted it would pick up in the medium term.
“Most directors still expected economic conditions to improve over the medium term, although some expressed considerable uncertainty about the near-term prospects for economic growth,” according to minutes released today in Washington summarizing the discussions.
Employment growth was “sluggish” and the elevated jobless rate “remained a source of concern,” board members of the 12 banks said, according to the minutes. Directors reported evidence consumer spending slowed and cited risks from drought in the U.S., “uncertainty” about the federal budget and strains in global financial markets.
The report gives central bankers anecdotal evidence on the economy before their next meeting Sept. 12-13, when they will weigh whether additional accommodation is needed to spur the expansion. Chairman Ben S. Bernanke has an opportunity to clarify his policy views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming.
The world’s largest economy will expand 1.8 percent in the third quarter and 2.1 percent in the fourth, according to the median of 75 estimates in a Bloomberg survey. Gross domestic product grew 2 percent in the first quarter of this year before decelerating to 1.5 percent in the following three months.
Recommendations about changing the discount rate, which has been at 0.75 percent since February 2010, were the same as in meetings since December. Members of the Boston Fed’s board of directors urged a quarter-percentage point reduction, to 0.5 percent, while the Kansas City Fed repeated its request for a quarter-point rise. The other 10 banks did not request a change.
Each of the Fed’s 12 regional banks has a nine-member board of directors that requests discount-rate changes. The requests are subject to final review and determination by the Fed Board, which consists of the central bank’s seven Washington-based governors. They review requests about every two weeks.
The Standard & Poor’s 500 Index was little changed at 1,411.94 as of 2:41 p.m. in New York and has advanced 12 percent this year. The yield on the benchmark 10-year Treasury declined 0.02 percentage point to 1.62 percent.
Longer-term inflation expectations “remained stable” because of lower energy prices, the directors said. Crude oil futures fell to this year’s low of $77.95 a barrel on June 21 in New York trading. The core personal consumption expenditures index, which excludes volatile food and energy costs, hasn’t exceeded 2 percent since November 2008.
Automobile sales had “solid increases” while the housing market showed signs of “continued, though uneven, improvements,” including a gain in home sales and higher prices in a number of areas, the directors said.
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