WASHINGTON — Federal Reserve officials were almost ready to raise interest rates in September but held off because of China’s economic slowdown and its potential to derail U.S. growth and inflation.
Minutes of the Sept. 16-17 discussions released Thursday showed the central bank thought the time for the first Fed rate increase in nine years “might be near.”
However, policymakers decided to wait for evidence that the economy had not weakened and that inflation would gradually move back toward the Fed’s 2 percent annual target.
Some members also expressed concerns that a premature rate increase could harm the central bank’s credibility.
“Simply put, the Fed still doesn’t have enough confidence that the economy will remain strong enough to return inflation to the target to begin the tightening process,” said Sal Guatieri, senior economist at BMO Capital Markets.
The September meeting had been preceded by weeks of speculation over whether the Fed would vote to raise rates. Fed Chair Janet Yellen said at a news conference after the meeting that a rate hike was still likely this year, a prediction she repeated two weeks ago during a speech in Massachusetts.
Since then, the government has released economic data that could give Fed officials further pause. Employers added just 142,000 jobs in September, and officials lowered their estimate of job gains in July and August by a combined 59,000. That left monthly job growth at a mediocre 167,000 in the July-September period, down from 231,000 in the previous quarter.
The Fed’s two final meetings of this year are on Oct. 27-28 and Dec. 15-16.
“I believe the jobs report makes an October rate hike out of the question, but if we have some strong employment reports before the December meeting, then a case could still be made from a December rate increase,” said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University.
The Fed has kept its benchmark rate at a record low near zero since December 2008. It has not raised rates since June 2006.
