Fed says U.S. economy is still vulnerable to shocks

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Federal Reserve members said the U.S. economy was still vulnerable to potential shocks when they met in June.

"Most participants saw the economy as still quite weak and vulnerable to further adverse shocks," the Federal Open Market Committee members said in minutes released today. "Conditions in the labor market remained poor, and the unemployment rate continued to rise."
Inflation is a primary concern for Fed members and economists alike. The minutes said that while the FOMC members are concerned about inflation sparking as oil and commodity prices rise, "most participants expected core inflation to remain subdued for some time."

Looking ahead two to three years, "the staff anticipated that financial markets and institutions would continue to recuperate, monetary policy would remain stimulative, fiscal stimulus would be fading, and inflation expectations would be relatively well anchored," the FOMC minutes said.

With that, the Fed projects that U.S gross domestic product expansion will be "at a rate well above that of its potential," and expects unemployment would "decline significantly," while "inflation would stay low." the minutes said.

The discussions and conclusions drawn were formulated when the FOMC members met on June 23 and 24 in Washington. As policy, the details of the discussions are released later.

Anthony Massucci is a senior writer for DailyFinance. You may follow him on Twitter athianthony.
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