WASHINGTON–The Federal Reserve is in a “holding pattern” heading toward its July policy meeting in the wake of mixed economic data and the vote by the United Kingdom to exit the European Union.
The Wall Street Journal quoted Fed governor Daniel Tarullo as saying he believes the central bank should wait for more convincing evidence that inflation is closer to—and would remain near—the Fed’s 2% target before raising short-term interest rates again. He also warned that because rates are still so close to zero, the Fed has limited tools to respond if the economy slows down, another factor that argues for a wait-and-see approach, the Journal reported.
“I look at this as an opportunity for greater maximum employment, in a context in which inflation is not at our stated target, not near our stated target, and hasn’t been so in quite some time,” he said in an interview with The Wall Street Journal. “This is not an economy that is running hot.”
According to the Journal, Fed officials generally agreed at their June 14-15 meeting that it was “prudent to wait” for additional data before considering another rate rise, according to minutes of the session released Wednesday.
The Fed raised its benchmark federal-funds rate in December from near zero to a range between 0.25% and 0.5%. At the beginning of 2016 a number of analysts, including within credit unions, had predicted the Fed would vote four times this year to raise rates, but it now seems unlikely.