Directors at the Federal Reserve’s district banks said last month the U.S. expansion continued at a “modest to moderate” pace amid strength in housing and autos, while risks remained from federal budget reductions and rising interest rates.
“Most directors noted strengthening in the housing and auto sectors, but their comments on manufacturing were mixed,” according to minutes released today in Washington summarizing the discussions. “Directors continued to see downside risks to the outlook stemming from ongoing fiscal constraints, the elevated unemployment rate, and uncertainty about employers’ health-care costs.”
Employment gains continued even as the jobless rate was elevated, the directors said. Inflation expectations remained stable, according to the record of the gathering. Some directors reported that higher long-term interest rates had “noticeably lowered residential mortgage refinancings and noted the possible effect of higher rates on economic activity more generally,” the minutes show.
The policy-setting Federal Open Market Committee will debate at its next meeting Sept. 17-18 whether to slow its $85 billion monthly pace of asset purchases, which it has pledged to maintain until the labor market improves substantially. The Fed has kept the main interest rate near zero since December 2008.
The board made no change to the discount rate, which has been at 0.75 percent since February 2010. Directors at the Philadelphia, Dallas and Kansas City district banks requested a quarter percentage-point increase in the rate to 1 percent. The other nine reserve banks voted to keep the rate unchanged.
To contact the editor responsible for this story: Chris Wellisz at email@example.com