(Reuters) - Federal Reserve policymakers expressed concern last month that raising interest rates too soon could pour cold water on the U.S. economic recovery, and fretted over the impact of dropping “patient” from the central bank’s interest rate guidance.
* At the central bank’s last policy-setting meeting in January, Fed officials debated the impact that stubbornly low inflation measures were having on the central bank’s confidence in moving ahead with raising rates.
* They also noted how China’s economic slowdown and tensions in the Middle East and Ukraine posed downside risks to the U.S. economic growth outlook, according to minutes from the Federal Open Market Committee’s Jan. 27-28 meeting.
RICK MECKLER, PRESIDENT, LIBERTYVIEW CAPITAL MANAGEMENT, JERSEY CITY, NEW JERSEY:
“The reality is it’s really nothing new. For people who were expecting some major shift, you’re not seeing it here. So you’re left with stocks have been on an extended rally, and the likelihood that while we may come to a bit of a pause in the rally, there’s nothing to really force profit-taking.
On a first rate hike: “I don’t think it moves the needle. But what is disconcerting in general is the economy hasn’t rallied more strongly, and their recognition that it’s still a very tepid recovery. The message is unfortunately more of the same in terms of economic growth, and it’s likely to be more of the same in terms of a very accommodative monetary policy.”
GARY THAYER, HEAD OF GLOBAL MACRO STRATEGY AT WELLS FARGO INVESTMENT INSTITUTE IN ST. LOUIS:
“We get a little more details than what we got from their statement right after the meeting, and although it was a unanimous decision at the time of the meeting, there was some difference of opinion and that is being interpreted right now in the markets. A rate hike is still possible but it’s not necessarily a sure thing.
“There is some concern of course about global events and what has been happening overseas with Greece and Ukraine and some of the slow wage growth we saw in reports prior to this meeting. But generally, the economy is doing better so these minutes don’t rule out a Fed rate hike. It’s still on the table, there is just a little more uncertainty as to when it may happen. They repeated their statement that moves are likely to be data dependent, which means you can expect anything depending on what happens in the economy. So there is nothing definitive here, just a little more of the open-ended possibility that they are not necessarily going to be quick to move.”
GREG PETERS, WHO HELPS MANAGE OVER $543 BILLION IN ASSETS AS SENIOR INVESTMENT OFFICER AT PRUDENTIAL FIXED INCOME, A UNIT OF PRUDENTIAL INVESTMENT, NEWARK, N.J.:
“I think it’s probably much more dovish than anybody anticipated, that’s for sure. I think June is going to be hard for them to move but that’s not to say they won’t. The data are not supportive of that view of a rate rise in June. We’ve added back duration. I think the general idea from our perspective is that when rates get over 2 percent, we get interested.”
WAYNE KAUFMAN, CHIEF MARKET ANALYST AT PHOENIX FINANCIAL SERVICES IN NEW YORK:
“This isn’t a surprise. I don’t expect a rate hike this year. There’s still a lot of slack in the economy, as we saw this morning with the capacity utilization number. More importantly, you have central banks around the world lowering interest rates. I think the Fed just doesn’t want to go against that. It sees that the global economy isn’t strong enough for rates to go up.
“We’ve been thinking equities are the place to go for a while. This is an ideal environment for equities. You don’t have much coupon protection for bonds, and you have plenty of sectors and individual companies that are doing well. We’re not buying the whole market; our key word is selectivity. I’m not making the case that a rising tide will lift all boats, but there are still plenty of pockets of growth out there.”
STOCKS: U.S. stock indexes were modestly higher on the newsBONDS: U.S. bond prices added to gainsFOREX: The dollar fell against the euro and yen
Americas Economics and Markets Desk; +1-646 223-6300