Federal Reserve policy makers at their last meeting said a global slowdown and a stronger dollar posed potential risks to the outlook for the U.S. economy.
A number of participants said growth “might be slower than they expected if foreign economic growth came in weaker than anticipated,” according to minutes of the Sept. 16-17 Federal Open Market Committee meeting released Wednesday in Washington.
Some officials said Europe’s cooling economy and low inflation could lead to a further appreciation of the dollar. That, in turn, might curb U.S. exports and limit price gains that have lagged behind the Fed’s goal.
The FOMC last month retained a pledge to keep interest rates near zero for a “considerable time” after it concludes an asset purchase program that’s due to end after its October meeting.
“Some participants saw the current forward guidance as appropriate in light of risk-management considerations, which suggested that it would be prudent to err on the side of patience while awaiting further evidence of sustained progress toward the committee’s goals,” minutes of the gathering show.
At the same time, “the concern was raised that the reference to ‘considerable time’ in the current forward guidance could be misunderstood as a commitment rather than as data dependent,” the minutes said.
Some officials have said dropping the pledge would offer more flexibility to react to new economic data. Dallas Fed President Richard Fisher and Philadelphia’s Charles Plosser both dissented against the September FOMC statement.
The jobs report last week added to evidence that the rebound continues, with a 248,000 gain in payrolls last month after a 180,000 increase in August that was bigger than previously estimated. That pushed unemployment to a six-year low of 5.9 percent, according to the Labor Department.
Other indicators, such as data on the duration of unemployment and the number of people working part time because they can’t find full-time work, still suggest slack remains in the jobs market.
“The labor market has yet to fully recover,” Fed Chair Janet Yellen said at a press conference after the FOMC meeting. “There are still too many people who want jobs but can’t find them.” She added that inflation remains below the Fed’s 2 percent objective.
Projections released Sept. 17 show most officials foresee an interest-rate increase sometime next year. The central bank has kept its benchmark rate near zero since December 2008.
Better-than-expected employment data are bringing forward expectations for higher rates. Fed officials projected at the end of last year that the jobless rate at the end of 2014 would be between 6.3 percent and 6.6 percent.
“The unemployment rate is getting to levels where there’s pressure to start normalizing policy sooner rather than later,” said Aneta Markowska, chief U.S. economist at Societe Generale SA in New York.