Economy Watch: FOMC Uncertain About Economy

The Federal Open Market Committee's recent meeting minutes show the Fed is uncertain about what's ahead for the U.S. economy as global economic jitters persist.

The Federal Open Market Committee released the minutes from its Jan. 26-27 meeting on Wednesday, and in them the Fed appeared to be not overly concerned about the recent wobbles in the world economy, but nevertheless was uncertain about what’s ahead. Or so the minutes seemed to say, since interpreting them is always something of a guessing game. “In assessing the medium-term outlook, participants discussed the extent to which the recent turbulence in global financial markets might restrain U.S. economic activity,” the minutes noted.

The minutes went on: “While acknowledging the possible adverse effects of the tightening of financial conditions that had occurred, most policymakers thought that the extent to which tighter conditions would persist and what that might imply for the outlook were unclear, and they therefore judged that it was premature to alter appreciably their assessment of the medium-term economic outlook.”

The FOMC did acknowledge that global financial market conditions deteriorated sharply in January, as recent developments in Chinese financial markets and the further decrease in crude oil prices appeared to increase concerns about global economic growth. For the foreseeable future, then, it’s likely that interest rates aren’t going up anytime soon: “Market expectations for the policy rates of major foreign central banks, which had risen somewhat after the December FOMC meeting, ended the period lower,” the Fed said.

The Fed minutes also noted that credit continued to be broadly available in the commercial real estate sector. “The growth of CRE loans on banks’ balance sheets remained strong in the fourth quarter, and issuance of CMBS continued at a robust pace in December,” the minutes said. “However, a moderate net percentage of banks reported…that they had tightened standards on CRE loans during the fourth quarter, and credit spreads in CMBS markets continued to widen over the inter-meeting period.”