Extracts From the Minutes of the Federal Open Market Committee:
In their consideration of monetary policy for the period ahead, members judged that the information received since the Committee met in April indicated that the pace of improvement in labor market conditions had slowed in recent months while growth in economic activity appeared to have picked up from the low rates recorded in the fourth quarter of 2015 and the first quarter of 2016. Although the unemployment rate had declined over the intermeeting period, job gains had diminished. After only a modest increase early in the year, growth in household spending had strengthened in recent months. Since the beginning of the year, the housing sector had continued to improve and the drag from net exports had lessened, but business fixed investment had been soft. Inflation continued to run below the Committee's 2 percent objective, partly reflecting declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined over the intermeeting period; most survey-based measures of inflation expectations were little changed.
With respect to the economic outlook and its implications for monetary policy, members continued to expect that, with gradual adjustments in the stance of monetary policy, economic activity would expand at a moderate pace and labor market indicators would strengthen. Most members made only small changes to their forecasts for economic activity and the labor market. Most judged it appropriate to avoid overweighting one or two labor market reports in their consideration of the economic outlook, but they indicated that the recent slowing in payroll employment gains had increased their uncertainty about the likely pace of improvements in the labor market going forward.
An additional factor in the Committee's policy deliberations was the upcoming U.K. referendum on membership in the European Union. Members noted the considerable uncertainty about the outcome of the vote and its potential economic and financial market consequences. They indicated that they would closely monitor developments associated with the referendum as well as other global economic and financial developments that could affect the U.S. outlook.
After assessing the outlook for economic activity, the labor market, and inflation, and after weighing the uncertainties associated with the outlook, members agreed to leave the target range for the federal funds rate unchanged at 1/4 to 1/2 percent at this meeting. Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data regarding labor market conditions as well as information that would allow them to assess the consequences of the U.K. vote for global financial conditions and the U.S. economic outlook. They judged that their decisions about the appropriate level of the federal funds rate in coming months would depend importantly on whether incoming information corroborated the Committee's expectations for economic activity, the labor market, and inflation.