What Slowdown?

Notes from a Federal Reserve meeting earlier this month suggest that Fed policymakers have brushed aside evidence of an economic slowdown early this month and want to keep raising interest rates in the months ahead.

According to The New York Times, notes from the Fed’s May 3 meeting, released yesterday, indicate that the group is likely to raise rates several more times this year, even if higher oil prices take a toll on growth. The notes also suggest uncertainty and disagreement among Fed officials about the direction of the economy.

Though statistics distributed at the meeting suggested slowing growth, the participants indicated the feeling that any slowdown would be transitory and that they should “should not overreact to a comparatively small number of disappointing indicators.”

In fact, in the weeks since the meeting, new data has indicated that job creation, consumer spending and exports have been stronger than originally thought. Fed officials were particularly fixated on higher oil prices, noting that they were feeding into higher prices for other goods and services and that businesses were having an easier time passing cost increases on to their customers.

The notes also suggest that Fed officials are still reasonably confident that consumer prices will climb slowly and that inflation expectations will remain low.

Since the Fed's meeting, the inflation picture has brightened. The Labor Department reported last week that core inflation, which excludes prices for energy and food, had all but stopped in April. The Times said that was good news, even if it heightened the confusion.