WASHINGTON -- Federal Reserve officials were almost ready to raise interest rates in September but held off because of China's economic slowdown and its potential to derail U.S. growth and inflation.
Minutes of the Sept. 16-17 discussions showed the central bank believed the time for the first Fed rate increase in nine years "might be near."
But policymakers decided that it would be "prudent to wait" for evidence that the economy had not deteriorated and that inflation would gradually move back toward the Fed's 2 percent annual target. Some members also expressed concerns that a premature rate hike could harm the central bank's credibility.
The September meeting had been preceded by weeks of speculation over whether rates would be increased. The Fed decided against a rate hike, although various officials have indicated it was a close call.
Fed Chair Janet Yellen told reporters at a news conference following the meeting that a rate hike was still likely this year, a prediction she repeated two weeks ago during a speech in Massachusetts.
But since then, the government has released economic data that could give Fed official further pause.
Employers added just 142,000 jobs in September, and officials lowered their estimate of job gains in July and August by a combined 59,000. That left monthly job growth at a mediocre 167,000 in the July-September period, down from 231,000 in the April-June period.
Many economists believe the weak job report has eliminated the possibility of a rate hike at the next meeting in October. Some believe the Fed could end up waiting until next year to begin raising rates.
The Fed's two final meetings of this year will occur on Oct. 27-28 and Dec. 15-16.
"I believe the jobs report makes an October rate hike out of the question, but if we have some strong employment reports before the December meeting, then a case could still be made from a December rate increase," said Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University.