The intermeeting period between April and June was a roller coaster ride with expectations for the path of monetary policy rising steadily before plunging, and the Federal Open Market Committee (FOMC) pulling back from its previous strong signals for a rate increase in June.

The minutes from the June FOMC meeting reveal that deliberations focused on a surprisingly weak labor market report for May and the increasing likelihood that the UK would indeed vote to leave the European Union, “Brexit,” as critical factors undermining previous confidence that the economy was ready for a June hike.

Despite early indications that economic activity was rebounding in the second quarter, supported by solid consumer spending and dissipating headwinds from a strong US dollar’s impact on net exports, and a deeply rooted reluctance to change course based on one month’s data, the slowdown in payroll job growth and the decline in the labor force participation rate rattled the committee’s confidence about the fundamental strength of the labor market relative to previous years. Debate on whether the abrupt slowdown was temporary or not, as well as discussion of the likely persistence of the first quarter weakness in business investment added to the shift in mood.

With heightened uncertainty regarding the domestic economy, the unknown global economic and financial market repercussions of a Brexit turned the tide from confidence to caution. The inclination toward a June rate increase following the April meeting was predicated on confidence in forecasts of near term events. Developments at home and abroad in early June left the FOMC decidedly less sure about the future.

Staring down the uncertainty inherent in economic forecasting is an unavoidable part of setting monetary policy. In June the FOMC blinked. Maybe for the better.

Tags: Federal Reserve, FOMC, monetary policy