The Toronto stock market, marginally lower earlier in the day, fell even more after the minutes showed policy-makers at the U.S. central bank questioned whether all factors contributing to slowing growth in the first quarter were transitory.
The Federal Reserve minutes, released at mid-afternoon, showed policy-makers largely agreed at their April 28-29 meeting that June would be too early to start raising its key interest rate, which has been at near zero since December 2008.
But while its statement after the April meeting said slower growth in the American economy partly reflected “transitory factors” such as severe winter weather, the minutes showed that officials debated just how temporary the slowdown might be.
Kevin Headland, director of capital markets and strategy with Manulife Asset Management, said that after the disappointing first-quarter U.S. growth numbers, most observers felt September or even December was more likely for a rate increase.
“Looking at the unemployment numbers and the employment market, maybe they should have raised rates already, but inflation is muted globally … so I think the Fed is really trying to be extremely cautious about their rate hike timing and pace at this point,” he said.
“Corporations are flush with liquidity (but) they’re not in a spending mood right now and I think consumers are maybe a bit hesitant because what they’re hearing, perhaps even from the Fed, is that things aren’t maybe as good as they need to be and therefore they’re kind of sitting and saving their money rather than spending.”
In earnings news, Target Corp., which has pulled the plug on its failed expansion into Canada to concentrate on U.S. operations, reported a nearly 52 per cent surge in its first-quarter profit, evidence that efforts to turn around its business are paying off. The results handily beat Wall Street expectations and its stock was up 26 cents at $ 78.18 (U.S.).