Tag Archives: Interest Rates

Housing, medical care support U.S. underlying inflation

Job seekers at job fair

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices moderated in May, but sustained increases in housing and healthcare costs kept underlying inflation supported, which could allow the Federal Reserve to raise interest rates this year.

While another report on Thursday showed an increase in the number of Americans applying for unemployment benefits last week, the trend remained consistent with a healthy labor market. The data came a day after the Fed downgraded its assessment of the jobs market and gave a mixed view of the economy.

The Labor Department said its Consumer Price Index increased 0.2 percent last month, slowing from April’s 0.4 percent rise. Gasoline prices rose modestly and the cost of food fell.

In the 12 months through May, the CPI gained 1.0 percent after advancing 1.1 percent in April.

Stripping out the volatile food and energy components, the so-called core CPI, increased 0.2 percent after a similar gain in April. That took the year-on-year core CPI rise to 2.2 percent from 2.1 percent in April.

Economists polled by Reuters had forecast the CPI gaining 0.3 percent last month and the core CPI rising 0.2 percent.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.6 percent. The U.S. central bank on Wednesday kept interest rates unchanged and said it expected inflation to remain below its target through 2017.

While the Fed signaled it still planned two rate hikes this year, there was less conviction, with six officials expecting only a single increase, up from one in March. The Fed raised its benchmark overnight interest rate in December for the first time in nearly a decade.

The dollar extended losses against the yen on the data, while prices for U.S. government debt were little changed.

FOOD PRICES FALL

Last month, gasoline prices rose 2.3 percent after surging 8.1 percent in April. Food prices fell 0.2 percent, reversing the prior month’s increase.

Within the core CPI basket, housing and medical costs maintained their upward trend. Owners’ equivalent rent of primary residence rose 0.3 percent after rising by the same margin in April.

Medical care costs increased 0.3 percent after a similar gain in April. The cost of hospital services shot up 0.7 percent after rising 0.3 percent the prior month. Doctor visit costs rose 1.0 percent, but the cost of prescription medicine fell 0.4 percent after increasing 0.7 percent in April.

Apparel prices rose 0.8 percent. The cost of used cars and trucks dropped 1.3 percent, the biggest fall since March 2009. Prices for new motor vehicles fell 0.1 percent.

In a second report, the Labor Department said initial claims for state unemployment benefits increased 13,000 to a seasonally adjusted 277,000 for the week ended June 11.

The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, slipped 250 to 269,250 last week.

Jobless claims have now been below 300,000, a threshold associated with a strong job market, for 67 straight weeks, the longest streak since 1973. The Fed said on Wednesday “the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up.”

The U.S. central bank also noted that while the unemployment rate had declined, “job gains have diminished.”

But with job openings near record highs, both economists and Fed officials expect job growth to pick up after the economy added only 38,000 jobs in May, the smallest increase since September 2010.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Fed leaves interest rates unchanged, signals two hikes this year

Federal Reserve Chair Janet Yellen holds a press conference in Washington

By Jason Lange and Howard Schneider

WASHINGTON (Reuters) – The Federal Reserve kept interest rates unchanged on Wednesday and signaled it still plans two rate increases this year, saying it expects the U.S. job market to strengthen after a recent slowdown.

The U.S. central bank, however, lowered its economic growth forecasts for 2016 and 2017 and indicated it would be less aggressive in tightening monetary policy after the end of this year.

Fed policymakers gave no indication of when they might raise rates, though their projections leave the door open to an increase next month.

“The pace of improvement in the labor market has slowed,” the Fed said in a statement. It added, however, that “economic activity will expand at a moderate pace and labor market indicators will strengthen” even with gradual rate increases.

Updated projections from Fed policymakers point to annual economic growth of only 2 percent for the foreseeable future, slightly lower than forecast at the March policy meeting.

Policymakers have been worried about potential weakness in the U.S. labor market and the possibility of financial turmoil if Britain votes next week to leave the European Union. The Fed statement on Wednesday made no reference to that vote.

“It’s as dovish as the Fed can get without actually cutting rates. Even (Kansas City Fed President) Esther George withdrew her dissent. The path of rates is lower, which is a big dovish swing,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Fund Management.

Financial markets all but priced out a rate increase this year after the Fed statement, and U.S. short-term interest rate futures contracts rose. U.S. stocks held on to their pre-meeting gains.

Fed Chair Janet Yellen is scheduled to hold a news conference at 2:30 p.m. EDT (1830 GMT).

NO DISSENTS

The Fed left its target range for overnight lending rates between banks at between 0.25 percent to 0.50 percent, keeping on hold a campaign to lift borrowing costs that started late last year.

It raised rates in December for the first time in nearly a decade and signaled four increases were likely in 2016. Concerns about a global economic slowdown and volatility in financial markets subsequently reduced that number to two.

Although worries about the health of the global economy have eased, a sharp slowdown in U.S. hiring in May was unsettling. More recent data have indicated that last month’s jobs report may have been a blip.

The Fed statement said economic activity appeared to have picked up since April.

Economists polled by Reuters had seen virtually no chance that the Fed would raise rates on Wednesday. Most had expected it to do so in July or September on a view that the U.S. job market would bounce back and Britain’s EU referendum would not lead to a financial meltdown.

There were no dissents in the Fed’s rate decision on Wednesday.

(Reporting by Jason Lange and Howard Schneider; Additional reporting by David Chance; Editing by Paul Simao)

Yellen faces fine balance on FED rate hike

Federal Reserve Chair Janet Yellen speaks at the Radcliffe Institute for Advanced Studies at Harvard University in Cambridge

By Jonathan Spicer

PHILADELPHIA (Reuters) – Federal Reserve Chair Janet Yellen will likely keep the door open to an interest rate hike within the next few months when she speaks on Monday, while striking a balanced tone about recently disappointing jobs growth and mixed signals in the U.S. economy.

Yellen’s speech to the World Affairs Council of Philadelphia at 12:30 p.m. ET (1630 GMT) will address the economy and monetary policy, and is the last public comment by U.S. central bankers before their June 14-15 meeting.

The chances of a rate hike at that meeting were all but killed by a report showing the U.S. economy added only 38,000 jobs in May, muting recently upbeat data on consumer spending and overall growth. A sensitive British vote on European Union membership set for later this month is another reason for the Fed to wait.

Economists now see July or September as more likely timing for a quarter-point policy tightening, after the central bank lifted off from near-zero rates in December.

Yellen could note that the May report does not necessarily suggest a more permanent gloom for the labor market, where unemployment at 4.7 percent is at its lowest level since the beginning of the recession. On rates, she could repeat her line from a week-and-a-half ago that a rise could be appropriate “probably in the coming months.”

Millan Mulraine, deputy chief economist at TD Securities in New York, said he expects the Fed Chair to reiterate a “relatively upbeat outlook on growth and inflation, while continuing to emphasize the need for caution.”

While likely keeping a July rate hike on the table, Yellen “will emphasize that any decision to act will be highly data-dependent,” he wrote in a note to clients.

The worst monthly jobs growth in more than 5-1/2 years comes as other parts of the world’s largest economy appear to have rebounded from a sluggish winter. U.S. inflation remains below a 2 percent target but has shown signs of stability.

Earlier on Monday, Boston Fed President Eric Rosengren, a voter on policy this year, said that while rate hikes are on the horizon, the central bank will need to determine whether the employment report “is an anomaly or reflects a broader slowing in labor markets.” [L1N18X0C3]

(Reporting by Jonathan Spicer; Editing by Meredith Mazzilli)

Federal Reserve swimming against global tide of easier rates

Federal Reserve Chair Janet Yellen speaks at the Radcliffe Institute for Advanced Studies at Harvard University

By Jamie McGeever

LONDON (Reuters) – Rarely has the world’s most important and powerful central bank been so isolated.

As the Federal Reserve prepares the ground for another interest rate hike, most other central banks are moving in the opposite direction. And the divergence is widening.

No fewer than 53 central banks have eased monetary policy since the start of last year, almost all by lowering rates. Indeed, the pace of policy easing nearly everywhere is accelerating even as the Fed nears its second hike of the cycle.

This raises several questions. If the global recovery is firmly rooted, why are so many central banks cutting rates? Can the global economy handle rising U.S. rates, and perhaps a stronger dollar that follows? Will the Fed be forced – again – to slow the pace of tightening or even abandon it altogether?

“I can’t ever remember a situation when we’ve seen anything like this before,” said Torsten Slok, chief international economist at Deutsche Bank in New York and a former International Monetary Fund economist.

“When I was at the IMF there was only one global business cycle. In the late 1990s and early 2000s it would have been impossible to imagine the kind of decoupling we have today,” he said.

The divergence can drive business costs and trade flows, lead to outsized exchange rate moves and highlight vulnerabilities in the global financial system, casting doubt on whether the world can cope with relatively higher U.S. borrowing costs and dollar.

Deflationary forces from the oil price plunge to $50 from $115 in the second half of 2014 kick-started central banks into action at the beginning of last year. Fourteen eased policy in January 2015, 11 in February and 12 in March. Denmark’s central bank cut rates four times in as many weeks.

The number of monthly rate cuts dwindled as the year progressed, troughing at three each in August and October, before the Fed delivered its first rate hike in a decade that December.

But even though oil has rebounded 75 percent from its multi-year lows, the pace of monetary easing is picking up. Twelve central banks loosened policy in March, 10 in April and 11 in May. Indeed, 11 central banks have begun easing cycles since the Fed raised rates in December.

At one level, the divergence suggests the U.S. economy is on a stronger footing than the rest of the world.

The U.S. economy is relatively closed, relying less on trade than many others. Imports and exports account for no more than 15 percent of U.S. growth, a proportion that’s more than twice that in most of the major developed and emerging economies.

Yet the Fed has already baulked at raising rates, both before and after its December move, precisely because of its fears over the global spillover effects from more tightening.

CONVERGENCE … BUT WHEN?

Financial markets and emerging economies are the main areas of concern. Both are potentially vulnerable to a rising dollar and higher U.S. bond yields that could follow from higher U.S. rates.

From mid-2014 to the end of last year the dollar rose around 25 percent against a basket of currencies, effectively a tightening of U.S. monetary policy which, according to Goldman Sachs, helped tighten U.S. financial conditions by almost 200 basis points.

There’s a view that this did more damage to the rest of the world through large-scale emerging market capital flight and China’s policy wobbles than the United States, where job growth and economic activity help up reasonably well.

The Organization for Economic Cooperation and Development on Wednesday urged governments to boost spending to lift the world economy out of a “low-growth trap”. It said global growth will meander along at 3 percent this year, its slowest pace since the financial crisis for a second year in a row.

Global conditions, China and the dollar have featured prominently in speeches by Fed chair Janet Yellen and other Fed officials over the last six months, a clear indication they are acutely aware of the global impact of higher U.S. rates.

But with dozens of other central banks in easing mode, conditions have abated around 100 basis points since the turn of the year, helping support global asset prices and giving the Fed leeway to raise rates again.

Francesco Garzarelli, co-head of global Macro and Markets Research at Goldman Sachs, said the Fed effectively participated in the global easing cycle this year by not following up last December’s hike with another increase.

“Markets have seen the Fed stop and go twice, but eventually the hike will come, maybe in June,” he said.

Garzarelli argued that inflation would need to pick up around the world for other central banks to change course. And echoing the OECD, he said the pressure on central banks to loosen monetary policy would lessen if governments shouldered more responsibility for boosting growth via fiscal policy.

“That transition is slowly underway, and the interplay between monetary and fiscal authorities may shift market expectations,” he said.

(Editing by Jeremy Gaunt)

Fed’s Bullard: rates too low for too long, risky

St. Louis Fed President James Bullard speaks about the U.S. economy during an interview in New York February 26, 2015.

By Elias Glenn

BEIJING (Reuters) – U.S. interest rates being kept too low for too long could cause financial instability in future and stronger market expectations for a rate rise are “probably good”, St. Louis Federal Reserve President James Bullard said on Monday.

A relatively tight labor market in the United States may also exert upward pressure on inflation, raising the case for higher interest rates, Bullard added.

His comments come as financial markets have increased expectations for a U.S. interest rate hike in June or July and a range of policymakers are now stating that a rise is firmly on the table for the next policy meeting in June.

“I do worry that keeping rates too low for too long could feed into future financial instability even if it doesn’t look like we’re in that situation today,” Bullard, a voting member of the Fed’s policy-setting committee, told reporters.

Market assessment for a Fed rate rise had been close to zero, and the idea it has come off zero is “probably good”, he said. “It does depend on the data and it’s certainly not 100 percent, but it’s not zero either. Some probability in between is the right thing to think at this point.”

Bullard said the U.S. labor market was performing well and global headwinds that had partly prevented the Federal Reserve from raising rates again may have waned.

The Federal Open Market Committee has laid out a data-dependent “slow normalization” of rates, he said, thereby the nominal policy rate would gradually rise over the next several years provided the economy evolves as expected.

“Labor markets are relatively tight. This may put upward pressure on inflation going forward,” he said. “This is an important factor supporting the FOMC view on the expected path of the policy rate.”

Expectations for a June rate hike rose last week following minutes from the central bank’s April policy meeting released on May 18 that showed Fed officials felt the U.S. economy could be ready for another interest rate increase.

A possible British exit from the European Union in a vote next month will not affect the Fed’s upcoming decision on rates, Bullard said.

“Even if it’s a vote to exit the EU, the next day nothing happens, because you have two years of negotiation during which new trade arrangements have to be set up,” he said. “I also see the probability of an exit vote has fallen somewhat lately.”

Some policymakers at the April meeting had said they were concerned financial markets could be roiled by Brexit or by China’s exchange rate policies.

In deciding whether to raise rates, the Fed looks for improvement in the economy and jobs, and evidence inflation is moving toward its 2 percent target.

The Fed last month kept its target overnight interest rate in a range of 0.25 percent to 0.50 percent. It raised interest rates in December after keeping them near zero for nearly a decade to help the economy recover from a steep recession.

(Writing by Kevin Yao; Editing by Jacqueline Wong)

Fed officials say 2-3 rate hikes possible this year

Federal Reserve building in Washington

WASHINGTON (Reuters) – The U.S. Federal Reserve could still raise interest rates two or three times this year and June remains on the table, two Fed policymakers said on Tuesday.

Atlanta Fed President Dennis Lockhart said he still assumes there will be two to three rate hikes this year and that markets are more pessimistic on the U.S. economic outlook than he is.

“I think it certainly could be a meeting at which action could be taken,” Lockhart said in reference to the Fed’s next policy meeting on June 14-15.

San Francisco Fed President John Williams, who was speaking with Lockhart at a joint appearance in Washington, agreed that two to three interest rate hikes this year “seems reasonable” and that there will be a lot more economic data to parse between now and mid-June.

“I think incoming data have actually been quite good and reassuring,” Williams said.

The U.S. central bank has held rates at a target range of 0.25 to 0.50 percent since moving from near zero in December.

A key inflation index showed U.S. consumer prices in April notched their biggest increase in more than three years.

Prices for contracts on Fed funds futures suggest investors see only an 11 percent chance of an interest rate increase in June. Rather, investors expect the first and only hike this year to come in November.

(Reporting by Lindsay Dunsmuir and Jason Lange; Editing by Chizu Nomiyama and David Gregorio)

Yen falls vs dollar for second day to near two-week low

Japanese Yen Notes

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – The yen slid to a nearly two-week low against the dollar on Tuesday as risk appetite improved for a second straight session, undermining traditional safe havens such as the Japanese currency.

Repeated verbal warnings from Japan over the weekend and on Tuesday saying it was prepared to step in to weaken the currency has also held off investors seeking to buy the yen at the expense of the dollar. The greenback has struggled recently as the Federal Reserve is on track to raise U.S. interest rates gradually.

“Risk appetite is naturally tied to the belief that we’re in an ultra-low-yield environment and investment managers can’t simply sit here,” said Jeremy Cook, chief economist at payments company World First in London.

“We have to see a move any time we see the slightest bit of positivity, by grabbing yield in emerging markets currencies, for instance.”

Global stock markets were on the upswing overall led by European and Wall Street shares, adding to the positive risk sentiment. [MKTS/GLOB]

In late morning trading, the dollar rose 0.7 percent to 109.11 yen, after hitting a roughly two-week peak of 109.27 <JPY=>. The U.S. currency tumbled to an 18-month low of 105.55 yen last week after the Bank of Japan stood pat on monetary policy.

Finance Minister Taro Aso said on Monday Tokyo was ready to intervene to weaken the currency if moves were volatile enough to hurt the country’s trade and economy. He reiterated that message on Tuesday.

A key economic adviser to Prime Minister Shinzo Abe, Koichi Hamada, also said on Tuesday Japan would intervene in currency markets if the yen rose to between 90 and 95 per dollar.

“There’s definitely the possibility of intervention,” said World First’s Cook. “But I don’t think this will turn the market around. It will be more of a stop-gap measure.”

He added that the only thing that could reverse the yen’s recent strength is fiscal and monetary policy action and any change could happen as early as June.

Meanwhile, speculators were cutting favorable bets on the yen, having piled into the currency in the past few weeks. [IMM/FX]

In other currencies, the euro rose 0.8 percent to a near two-week high of 124.38 yen <EURJPY=>, pulling away from a three-year trough of 121.48 plumbed late last week.

The euro was flat against the dollar at $1.1388 <EUR=>. The dollar index <.DXY> was at 94.171, having hit its highest in nearly two weeks earlier and extending its rise from a 15-month trough struck on May 3.

(Reporting by Gertrude Chavez-Dreyfuss in New York; Additional reporting by Anirban Nag in London; Editing by James Dalgleish)

Fed’s Kaplan says may back June or July rate rise

A guard walks in front of a Federal Reserve image before press conference in Washington

By David Milliken and Marc Jones

LONDON (Reuters) – Dallas Federal Reserve President Robert Kaplan said on Friday that he could back a rise in U.S. interest rates as soon as June or July, if U.S. economic data firms up as he expects.

Kaplan, who does not currently vote this year on the Federal Open Market Committee, said interest rates should rise gradually but that financial markets had underestimated the Fed’s readiness to follow December’s rate rise with another move.

“We’ll see how the second quarter unfolds but I think the market may well be underestimating how soon we might move next,” Kaplan said at an event in London hosted by think-tank OMFIF.

“If the second-quarter data is firming you will see me advocating in the not too distant future that we try to take the next step. We will see what meeting, whether that means June or July or what else. I’d like to see it happen,” he told reporters after.

The Fed kept rates on hold at 0.25-0.5 percent this week and signaled it was in no rush to raise them again soon, citing slowing economic activity despite an improved labor market.

The message pushed the dollar sharply lower and helped drive oil prices to their highest so far this year.

For economists it also added to a feeling that has been growing since the start of the year that U.S. rates may not be set to diverge from those in Europe and Japan as much as many had predicted.

Kaplan’s remarks were the first from a U.S. policymaker after this week’s Fed rate decision, and appeared calculated to drive home a more hawkish message on rates.

If GDP growth rebounds this quarter, as expected, “I personally will be moving toward advocating some removal of accommodation sooner rather than later,” Kaplan said in a Bloomberg TV interview after his speech.

“I will also advocate that we take these steps in a gradual and patient manner,” he said, expressing a cautious view on normalizing rates held widely at the Fed.

LOWER PEAK

Kaplan also said he expected rates to peak at a lower level than seen historically.

In forecasts released last month, all but one of the Fed’s 17 policymakers said they believe it will be appropriate to raise rates at least twice this year. Traders are betting on just one hike.

The Fed raised rates last December for the first time in nearly a decade but has kept them unchanged since then over worries about global growth and low inflation.

Kaplan forecast U.S. gross domestic product growth this year at 2.0 percent, slightly faster than he projected last month.

U.S. employers can continue to add jobs at a “healthy” pace without overheating the economy, largely because of a global labor surplus putting downward pressure on inflation, he said.

But Kaplan also expressed confidence that inflation, which has undershot the Fed’s 2.0 percent target for years, will return to that level over the medium term as the downward pressure from a strong U.S. dollar and cheap oil abates.

He told reporters he would be looking to see whether other economic indicators caught up with measures of a labor market that was rapidly closing in on full employment.

“It’s going to have to get reconciled one way or the other. It’s either going to happen with the PCE (inflation) and other numbers firming, or other numbers weakening,” he said.

“We still believe the consumer in the U.S. is strong and has the capacity to be spending.”

The state of the debate ahead of Britain’s June 23 referendum on whether to stay in the European Union could also affect Kaplan’s view about a Fed hike on June 15.

Sterling could suffer a “sudden depreciation” if Britain left the EU, he said, with ripple effects for the world economy.

(Reporting by Marc Jones, David Milliken and Ann Saphir; Editing by Clive McKeef and James Dalgleish)

U.S. Federal Reserve set to keep rates unchanged

Federal Reserve Chair Janet Yellen holds a press conference in Washington

By Lindsay Dunsmuir

WASHINGTON (Reuters) – The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday as it continues to monitor the impact from weakening global growth but may seek to signal to markets it is determined to resume policy tightening this year.

The Fed has held its overnight lending rate for banks at a target range of between 0.25 and 0.50 percent since it lifted the benchmark interest rate for the first time in a decade from near zero last December.

Since then the Fed has signaled more caution, despite the U.S. economy’s relative strength, as concerns a slowing China would depress global growth sparked steep stock price declines and tighter financial market conditions early in the year.

Fed officials reconvened Wednesday morning as scheduled for the second day of the two-day meeting, a Fed spokesperson said. A policy decision statement is due to be released at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is not scheduled to hold a press conference.

Markets have turned up since the last rate decision in March. The S&amp;P 500 [.SPX] has risen more than 14 percent since mid-February. China’s economy has also shown more positive signs, growing at a 6.7 percent pace in the first quarter.

A Reuters poll of more than 80 economists showed expectations were for two rate increases this year, with the possibility the Fed will hike in June.

Additionally, some of the pressures that have kept inflation lower than the Fed would like have abated. Oil prices have rallied, with the Brent benchmark crude [LC0c1] up 20 percent to around $44 a barrel since the Fed’s December rate hike, while the dollar has dropped around 4 percent against a basket of currencies during the same period.

Those factors may allow the Fed to reinstate a balance of risks assessment in its statement, most likely a description of the risks to the U.S. economic outlook as “nearly balanced.”

Such phrasing is usually seen as prerequisite to policymakers even considering another rate rise. However, the U.S. central bank has tried to move away from forward guidance as it implements rate hikes.

The Fed may also acknowledge the recent improved market indicators by dropping or softening its March warning that global economic and financial developments “continue to pose risks.”

“If anything, Fed officials will likely want to encourage markets to price in more tightening than is being priced in currently,” said Jim O’Sullivan, an economist at High Frequency Economics, in a note.

Investors currently see zero chance the Fed will raise rates at this week’s meeting and see a 23 percent probability of a hike in June, according to an analysis of Fed Fund futures by the CME Group.

EYE ON THE DATA

The Fed may be wary of making too strong a judgment on the resilience of the U.S. economy come June until it has more data.

The global situation has already caused the Fed rate setters to dial back their estimates on the number of rate rises this year. Predictions from policymakers now show two, compared to four last December.

Other major central banks are grappling with ways to deal with lackluster growth. The Fed remains concerned that with interest rates still close to zero it would have to rely on more unconventional policy tools should the economy slow.

Last week the European Central Bank kept its main refinancing rate at zero and its bank overnight deposit rate in negative territory.

The Bank of Japan could cut its rates further into negative territory when it meets on Thursday.

U.S. data in the pipeline includes the initial estimate of first-quarter gross domestic product growth on Thursday, which is expected to be weak. Economists polled by Reuters predict 0.7 percent growth for the first quarter. The Fed will look for signs over the next few weeks that the economy is accelerating for the second quarter.

Another strong monthly jobs report in just over a week’s time could assuage concerns as would evidence a recent uptick in inflation is being maintained.

As such if there isn’t a balance of risks reinserted into April’s statement, “Fed officials could still use their speeches to manage market expectations higher,” if they decide on June, said Sam Bullard, an economist at Wells Fargo.

(Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci)

Interest Rates Unlikely to Raise Yet

Federal Reserve building in Washington

By Jason Lange and Lindsay Dunsmuir

WASHINGTON (Reuters) – The Federal Reserve appears unlikely to raise interest rates before June amid widespread concern at the U.S. central bank over its limited ability to counter the blow of a global economic slowdown, minutes from the Fed’s March 15-16 policy meeting suggest.

The minutes released on Wednesday showed policymakers debated whether they might hike rates in April but “a number” of them argued headwinds to growth would probably persist, with many arguing they should be cautious about raising rates.

“Participants generally saw global economic and financial developments as continuing to pose risks,” according to the minutes.

Policymakers had signaled at the close of the March meeting that they expected to raise rates twice in 2016 but the timing of the hikes still appears up in the air.

According to the minutes, many Fed members said they were concerned that the central bank had limited firepower to respond to shocks from abroad because interest rates are already so close to zero.

“Many participants indicated that the heightened global risks and the asymmetric ability of monetary policy to respond to them warranted caution,” the minutes stated.

Investors have held doubts the Fed would raise rates at all this year and the minutes did little to shift bets on the path of policy.

Prices for fed futures contracts suggested investors still saw the chance of a rate hike in December as just better than even, and they saw virtually no chance of an increase at the April 26-27 policy meeting, according to the CME group.

“Resistance to near-term action is still quite entrenched,” said Ian Shepherdson, an economist at Pantheon Macroeconomics.

According to the minutes, several of the central bankers said elevated risks faced by the U.S. economy meant that raising rates in April “would signal a sense of urgency they did not think appropriate.”

A small minority indicated a rate hike might be warranted when the Fed meets at the end of April. After that meeting, policymakers next convene June 14-15.

Policymakers had signaled in December that four rate increases were likely in 2016, and the minutes of the March meeting highlighted the consensus within the Fed around a cautious outlook for the economy.

PROCEEDING WITH CARE

Fed chief Janet Yellen said on March 29 the U.S. central bank should “proceed cautiously” in raising rates, a view Fed Governor Lael Brainard pushed late last year which has been recently embraced by policymakers including St. Louis Fed President James Bullard, who had previously warned the Fed might hike too slowly.

Bullard said on Wednesday that economic data has been mixed since the March meeting, which could make it difficult for the Fed to raise rates this month.

The Fed left its target interest rate for overnight lending between banks at between 0.25 percent and 0.5 percent in March and in January after December’s hike which ended seven years of near-zero rates.

Global financial markets have been volatile since August amid concerns a slowing Chinese economy could drag heavily on global growth. Expectations the Fed would outpace other central banks in raising rates also tightened financial conditions by leading the dollar to strengthen in 2014 and 2015, though the consensus for caution has helped stabilize the U.S. currency.

At the same time, an inflation index closely followed by the Fed has begun to rebound, although policymakers were divided in March over whether the increase would prove lasting.

“Some participants saw the increase as consistent with a firming trend in inflation. Some others, however, expressed the view that the increase was unlikely to be sustained,” according to the minutes.

(Reporting by Jason Lange and Lindsay Dunsmuir in Washington; Editing by Andrea Ricci)