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WASHINGTON – Federal Reserve officials were largely divided at their meeting last month, when they decided to cut rates for the first time in a decade, with some arguing for a bigger cut rates, while others insisted that the Fed should not reduce them at all.
The minutes of the July 30 and 31 talks released Wednesday show that two officials believe the Fed should cut its key rate by half a percentage point, double the reduction of a quarter point finally accepted. by the central bank. On the other hand, some Fed officials have argued for a lack of rate cuts, saying the economy was starting to improve after a difficult period in the spring.
The minutes do not indicate any consensus on the pace of future reductions.
The financial markets have been turbulent since the July 31 rate cut, recording a fall of 800 points a day last week in the Dow Jones Industrial Average, while bad news has accumulated about the slowdown in the economy. and the latest developments in President Donald Trump's trade war with China.
As a result of these developments, investors are confident that the central bank will follow through with the reduction of the July rate by further cuts in future meetings. Private economists, however, are not so sure, estimating that the Fed may want to save some of its rate cuts if the situation deteriorates badly with the possibility of a recession.
The minutes have hardly shed any light on the outlook for rates, but the markets are hoping Fed Chairman Jerome Powell will send a clearer message on future rate hikes when he will deliver the statement. keynote speech delivered at the Fed's annual policy conference in Jackson Hole, Wyoming. , Friday.
The two Fed officials who have advocated for a larger rate cut "have spoken out in favor of more forceful action to better cope with stubbornly low inflation rates in recent years," he said. the verbal procedure.
The July action was approved by 8 votes to 2, with Esther George, president of the Fed's regional bank in Kansas City, and Eric Rosengren, president of the Boston Fed, dissidents and saying they did not want any rate reduction.
The minutes indicated that the majority opinion was in favor of a quarter-point reduction, considering it as a "mid-cycle adjustment", an expression used by Powell during his press conference, which caused an adverse reaction from the markets, investors hoping that the July reduction will be the first of a month. series of rate reductions.
The minutes highlighted three main reasons for this reduction, including recent signs of deceleration in the economy and concerns about continued inflation. Officials also felt that a rate cut would be a "prudent measure from a risk management point of view".
The minutes revealed that the Fed worried about the slowdown in business investment and global hurdles affecting Europe, Japan and other regions.
"Participants were aware that trade tensions were far from settled and that commercial uncertainties could intensify again," the minutes said.
On August 1st, in the aftermath of the Fed's rate cut, Trump announced that it would impose 10% tariffs on Chinese imports of $ 300 billion in order to force them to make more trade concessions at the negotiating table. Since that announcement, Trump has announced that it will defer about half of those tariffs until December 15 in order not to harm American consumers during the holiday season.
But economists warn that tariffs already applied will probably slow down US growth in the coming quarters.
© Copyright Dawson Creek Mirror News
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