Fed Minutes Show Wariness Over Global Growth

10/9/14
 
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from The Wall Street Journal,
10/8/14:

Angst About Overseas Economies, Strong Dollar Ease Path for Keeping Rates Low.

Federal Reserve officials have become more concerned that weak overseas growth and a strengthening U.S. dollar will crimp the domestic economy and hold down inflation, an outlook that has made them more inclined to stick to low interest rates.

Several officials worried at a Sept. 16-17 policy meeting that disappointing growth in Europe, Japan and China could restrain U.S. exports, according to minutes of the meeting released by the Fed Wednesday with the regular three-week lag. Meantime, the stronger currency—by reducing the cost of imported goods and services and putting downward pressure on commodities prices—could hold U.S. inflation below the Fed’s 2% objective. The Fed staff slightly reduced its projection for medium-run growth in part because of these concerns.

Angst about global growth and the economic impacts of a strong dollar represent a meaningful development in the Fed’s running debate about when to raise short-term interest rates from near zero.

Investors responded with relief to the Fed’s concerns and apparent caution about stepping away quickly from easy-money policies. The Dow Jones Industrial Average posted its largest one-day point and percentage increase since December 2013.

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