FOMC meet's minutes signal delay in rate hike on labor market concerns

The minutes from the Federal Open Market Committee meeting held during June 14-15, signaled a delay in rate hike, on mounting concern over the country’s labor market, with the non-farm payrolls data in May, shocking investors with the smallest net addition in US jobs in nearly five years.

Further, the Fed noted that the decrease in the participation rate as well as employment-to-population ratio, are serious causes for holding on to rates so far. Also, widespread unease over Brexit that took place immediately after the June FOMC meet, is posing serious challenges to the global economy.

The minutes further stated that the Fed officials would like to undertake a wait-and-watch move, closely and carefully analyzing any new threats that might emerge from the June 23 Brexit vote. At the June meeting, officials sparred over the health of labor market, the outlook for growth, risks to the economy, and whether underlying inflation is picking up. Those uncertainties were amplified by "considerable uncertainty" ahead of the UK referendum.

"Most participants judged that, in the absence of significant economic or financial shocks, raising the target for the federal-funds rate would be appropriate if incoming information confirmed that economic growth had picked up, that job gains were continuing at a pace sufficient to sustain progress toward the committee’s maximum-employment objective and that inflation was likely to rise to 2% over the medium term," the FOMC minutes of the meeting noted.

Meanwhile, the Fed, at its latest monetary policy meeting, decided to leave interest rates unchanged and lowered its expectations for future years. The minutes point to no further changes in the US interest rate policy this year.