The trade deficit in the U.S. widened 15 percent in May to $50.2 billion, the highest in almost three years, reflecting a surge in the cost of imported crude oil.

"Trade is still going to be a wild card" and shouldn't be "a major input" in policy-making decisions, said Drew Matus, a senior U.S. economist at UBS in Stamford, Connecticut. Fed officials should focus on "the inflation outlook, which has gotten quite bad," and on domestic purchases, he said. "I don't think trade is the be-all, end-all."

The Federal Open Market Committee cut its forecasts for growth this year at its June 21-22 meeting, before a July 8 government report showed that employers added 18,000 jobs last month, the fewest since September.

Unemployment

"Nonetheless, members saw the pace of the economic expansion as picking up over the coming quarters and the unemployment rate resuming its gradual decline," the committee said in the minutes of the meeting, released last week. While the jobless rate rose to 9.2 percent in June from 9.1 percent in May, it has fallen from a post-recession high of 10.1 percent in October 2009.

The FOMC is divided on whether additional monetary stimulus may be needed or whether economic conditions may warrant a withdrawal of accommodative policy "sooner than currently anticipated," the minutes showed.

The Fed completed its $600 billion bond-purchase program on June 30, and last month repeated its pledge to keep its benchmark interest rate at record lows "for an extended period." Policy makers cut the target for the federal funds rate, which banks charge each other for overnight loans, to between zero and 0.25 percent in December 2008.

Asian Demand

Dudley cited "robust" demand abroad for U.S. exports, particularly from Asia, in a June 10 Brooklyn speech as one "reason to expect the economy to recover from this soft patch." Expansion slowed to the 1.9 percent annual pace in the first quarter from 3.1 percent in October-December 2010.

Manufacturers in the south are a "major beneficiary of globalization," with auto, aerospace, pharmaceutical and commodity companies exporting around the world, Federal Reserve Bank of Richmond President Jeffrey Lacker said June 13 at a conference in Roanoke, Virginia. "Our ports are now jammed with these goods."