Fed officials adopted more cautious stance in September as economic uncertainty grew
By Howard Schneider
WASHINGTON (Reuters) -A growing sense of uncertainty around the path of the U.S. economy, with volatile data and tightening financial markets posing risks to growth, pushed Federal Reserve policymakers into a newly cautious stance last month, a position reaffirmed by top U.S. central bank officials in a series of statements this week.
Minutes of the Fed's Sept. 19-20 meeting showed policymakers wrestling with risks they agreed were no longer just about inflation, with world energy and food markets perhaps threatening a new surge in prices, but slowing global growth, labor strikes and tightening financial markets possibly clamping down on the economy in unexpected, and job-killing ways.
«A vast majority of participants continued to judge the future path of the economy as highly uncertain,» the minutes said, listing the plethora of reasons «supporting the case for proceeding carefully» before raising the Fed's benchmark overnight interest rate again.
The point was amplified by comments this week from top Fed officials who noted that the recent rise in U.S. Treasury yields may well take the place of further increases in the policy rate, serving to slow the economy, and inflation, beyond any further central bank action.
The moves in the bond market began after the Fed's last rate increase in July, was noted by a staff analysis in the September meeting that showed a rise in inflation-adjusted «real» rates of interest, and was reflected in recent comments by Fed Vice Chair Philip Jefferson and influential Governor Christopher Waller.
«The financial markets are tightening up and they are going to do some of the work for us… We are just keeping a very close eye on that. We will see how those higher rates feed
Read more on investing.com
