Paul Davidson

USA TODAY

WASHINGTON — Citing the recent sharp slowdown in U.S. job growth and imminent Brexit vote, Federal Reserve policymakers last month wanted to await more evidence that the labor market and economy were back on track before lifting interest rates again, suggesting the next hike is not imminent.

Fed officials did not provide a timetable for future increases, according to minutes of the Fed’s June 14-15 meeting. But they indicated that their decisions could play out over “coming months” and that they must review a range of positive data before acting again.

“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 (policymaking committee’s) expectations for economic activity, the labor market, and inflation,” the minutes said.

The meeting account also says Fed officials agreed “it was prudent to wait for additional data regarding labor market conditions” as well as the effects of the United Kingdom’s coming vote on whether to leave the European Union — known as Brexit — on markets and the U.S. economy. The Fed meeting took place about a week before the United Kingdom's vote to secede from the EU.

The summary suggests that a rate hike at the Fed’s late July meeting is unlikely and even calls into question a move at the central bank’s mid-September gathering. The Fed lifted its federal funds rate in December for the first time in nearly a decade but has stood pat since amid U.S. and global economic weakness and market turmoil.

Fed holds rates steady, sees more gradual hikes

Employers added an average of just 80,000 jobs a month in April and May, significantly below the 200,000-plus pace in recent years, including a 5½-year low of 38,000 in May. Policymakers “generally agreed that it was advisable to avoid overreacting to one or two labor market reports,” the minutes say. Still, “almost all participants judged that the surprisingly weak May employment report increased their uncertainty about the outlook for the labor market.”

At the same time, some Fed officials noted that with the unemployment rate and inflation near the Fed's targets, the next rate increase "should not be delayed too long." They said wage growth was accelerating and a key inflation measure was moving toward the Fed's 2% annual target.

The Fed said that despite the downturn in payroll gains, consumer spending and the economy generally picked up in the second quarter while business investment remained weak and inflation was still stubbornly low. Most officials said that, absent economic or financial shocks, it would be appropriate to raise the Fed's benchmark rate if data confirm that "economic growth has picked up, that job gains were continuing at (a solid pace) and that inflation was likely to rise to 2% over the medium term."

Barclays economist Rob Martin says a solid pickup in job growth this summer likely will clear the way for a September rate increase, while disappointing gains will probably take September off the table.

The minutes show Fed policymakers were also concerned about the Brexit vote. Most said it “could generate financial market turbulence that could adversely affect domestic economic performance.” After the vote, stocks sold off and then largely rebounded but have been volatile.

'Brexit' fall-out: Winners and losers

Fed policymakers also revealed at the June meeting that they expect slower rate hikes over the next few years, with Fed Chair Janet Yellen citing persistent economic headwinds at her post-meeting news conference. Officials predicted the rate will be 2.4% at the end of 2017, down from their 3% estimate in March.

“Many judged that (the rate) would likely remain low relative to historical standards, held down by factors such as slow productivity growth and demographic trends” such as retiring Baby Boomers, the minutes said. In light of the uncertainty about the neutral fed funds rate, several officials noted that slower rate increases would allow them to better assess their effect on the sluggish economy.