The Federal Open Market Committee (FOMC) is unlikely to raise interest rates on 15 June even though minutes of its April meeting show that “most” participants (including non-voting members) were inclined towards such a move.

If the Committee had embraced a June increase as a central scenario, it is likely that the April policy statement would have referred to possible action “at the next meeting”, as did the October 2015 statement preceding the December rate hike.

The majority inclined towards a June move, moreover, required evidence of “economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective”. Recent news is unlikely to have provided sufficient reassurance on these issues.

GDP growth should recover this quarter from just 0.5% annualised in the first quarter (below the Fed staff’s estimate) but may remain below par. The New York Fed’s “nowcasting” model is currently predicting growth of only 1.2%. The Atlanta Fed’s model is more optimistic, at 2.5%.

The April employment report released in early May, meanwhile, was slightly disappointing, with monthly payrolls growth slowing to 160,000 from a first-quarter average of 200,000, and the unemployment rate staying at 5.0%, up from 4.9% in January / February.

Annual consumer price inflation rose to 1.1% in April but the core rate excluding food and energy eased to 2.1% from 2.2% in March and 2.3% in February. The Fed prefers the personal consumption expenditures (PCE) price index as a gauge of inflation. Core PCE inflation was 1.6% in March; a June FOMC hike will be very unlikely if the April reading due on 31 May mirrors the decline in core CPI inflation – see chart.

The expectation here, based on the normal lag between narrow money and the economy, is that GDP growth will remain soft in the second quarter but rise significantly during the second half. Recent economic weakness may subdue labour market trends near term. Such a scenario could be consistent with a rate increase in September. There is a case for the FOMC to act preemptively but it is usually reactive (and too late).