Federal Reserve officials signaled they are unlikely to raiseinterest rates in June while leaving open the option of tighteninglater in the year.

Minutes of their April meeting, released on Wednesday inWashington, also confirmed that the Fed expects growth to pick upafter stalling in the first quarter, even as officials frettedabout the strength of the consumer spending that makes uptwo-thirds of the economy.

“The tone is frustration,” said Lindsey Piegza, chief economistat Sterne Agee & Leach Inc. in Chicago. “Why isn't the economygetting any stronger? They want to raise rates but the data is justtoo darn weak.”

Bond yields fell as some investors pushed back expectations fora rate increase beyond the September meeting of the Federal OpenMarket Committee. The next signal of Fed intentions will come onFriday, when Chair Janet Yellen gives a speech on the economicoutlook in Providence, Rhode Island.

Many participants “thought it unlikely that the data availablein June would provide sufficient confirmation that the conditionsfor raising the target range for the federal funds rate had beensatisfied,” according to minutes of the April 28-29 FOMCsession.

That sentiment outweighed the opinion of “a few” members whosaid they anticipated the economy would be ready for a Juneliftoff, the minutes showed. At the same time, officials didn'trule out the option of tightening at that time.

'Moderate' Growth

While the minutes show officials expect “moderate” growth toresume after the economy stalled early in the year, they alsohighlight concern that the stronger dollar and lower oil pricescould prove to be lasting headwinds.

“They are uncertain,” said Mark Vitner, a senior economist atWells Fargo Securities in Charlotte, North Carolina. “The data hasbeen soft but the economy feels like it is stronger.”

The Standard & Poor's 500 Index closed down less than 0.1percent to 2,125.85 at 4 p.m. in New York. The yield on 10-yearTreasury notes fell four basis points, or 0.04 percentage point, to2.25 percent.

Officials last month repeated that they will raise rates whenthey have seen further improvement in the labor market and are“reasonably confident” that inflation will move back up towardtheir 2 percent goal over the medium term.

The committee discussed, and ultimately rejected, the idea ofproviding “an explicit indication” to the public when they believea rate increase is likely in the near term, and resolved to maketheir minds up on a meeting-by-meeting basis.

September Liftoff

Most officials projected in March that they would raise thebenchmark federal funds rate this year, without specifying a date.Rates will probably be lifted in September, according to the medianforecast in a Bloomberg survey of economists.

Gross domestic product rose just 0.2 percent at an annual pacein the three months through March, versus 2.2 percent in the fourthquarter of 2014.

The minutes revealed a discussion about how much of the slowdownstemmed from causes that are likely to fade, including harsh winterweather, a labor dispute at West Coast ports and a “pattern” ofweak first-quarter data over a number of years.

Still, officials were surprised Americans weren't spending thewindfall from lower gasoline prices, with some voicing “particularconcern” because their forecasts for an economic rebound hinge onrobust growth in household spending.

Policy makers also worried that liftoff could trigger a sharprise in yields, as happened in mid-2013, underlining the importanceof careful communications on the timing of tightening to damp downmarket volatility.

“It was suggested that the tendency for bond prices to exhibitvolatility may be greater than it had been in the past, in view ofthe increased role of high-frequency traders, decreased inventoriesof bonds held by broker-dealers, and elevated assets of bondfunds,” the minutes said.

Bloomberg News

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