By Michael Flaherty and Jonathan Spicer
WASHINGTON/NEW YORK (Reuters) - Federal Reserve officials needed to see more signs of a strengthening U.S. economy before raising interest rates, according to minutes of a June Fed policy meeting, at which Greece's debt crisis was cited as a serious concern.
The minutes from the June 16-17 meeting show how the central bank continues to grapple with its plan to raise interest rates later this year, in the wake of mixed economic data domestically and market turmoil gathering steam abroad. The minutes underscored the view that a Fed rate hike would likely have to wait until at least September.
"Many participants emphasized that, in order to determine that the criteria for beginning policy normalization had been met, they would need additional information indicating that economic growth was strengthening, that labor market conditions were continuing to improve, and that inflation was moving back toward the Committee’s objective," the minutes said on Wednesday.
U.S. Treasury prices rose after the release of the minutes.
The officials added that lifting rates too soon while price pressures remained modest could hurt the Fed's credibility in being able to handle downside shocks to inflation.
"Our initial reaction is that they don’t contain a lot of surprises," said Laura Rosner, an economist at BNP Paribas in New York, adding that the minutes acknowledged improvement in the data.
In its June policy statement, the central bank kept interest rates at near zero, where they have been since December 2008. But the Fed indicated it was on track for at least one and perhaps a second rate increase later this year.
At the time of the Fed's two-day meeting in June, Greece had not yet defaulted on its debt, and China's stock market was not yet in free-fall.
Still, the minutes pointed to a serious concern policymakers have regarding Greece's economic problems, in a sign of how market tumult abroad could derail the Fed's rate hike plans if contagion spreads.
"Many participants expressed concern that a failure of Greece and its official creditors to resolve their differences could result in disruptions in financial markets in the euro area, with possible spillover effects on the United States," the minutes said.
The minutes also showed worries about the pace of China's economic growth. In the weeks since the Fed's June meeting, China's stock market has plunged, prompting the government to step in and stanch the system's bleeding.
The minutes showed the Fed was still on track to hike rates this year.
"Members thus saw economic conditions as continuing to approach those consistent with warranting a start to the normalization of the stance of monetary policy," the minutes said.
(Reporting by Michael Flaherty and Jonathan Spicer; Additional reporting by Richard Leong; Editing by Andrea Ricci)