The minutes from the January meeting of the Federal Reserve’s monetary policy setting committee, the Federal Open Market Committee (FOMC), a more detailed account than the statement released immediately following the meeting, and traditionally released three weeks after the meeting, indicate an increase in the uncertainty surrounding current economic conditions and their implications for economic growth, labor market improvements and inflation over the medium term.

A range of labor market indicators including strong payroll gains, an unemployment rate at or in the range of normal, as well as declines in other indicators of underutilization point to current strength in the economy. However, a slowdown in the growth of domestic economic output in the fourth quarter, a strong dollar restraining trade, concerns about the ongoing drag from the energy sector both domestically and in energy economies overseas, and related turbulence in global financial markets, highlight the downside risks to the outlook, and in particular the prospect of inflation moving toward the 2% target over the medium term.

While maintaining the 25-50 basis point target range for the federal funds rate, announced in the statement following the January meeting was widely expected, the minutes reveal some erosion in confidence regarding further progress in 2016 since the December meeting. In response to the weak performance of economic growth in the fourth quarter analysts have been pushing predictions for the next increase in the federal funds rate deeper into 2016 and lowering expectations for total accumulated increases for the year. The minutes from the January meeting will only add to the downward revisions.

Tags: Federal Reserve, FOMC, monetary policy