The Economy

Minutes Show Central Bank Divided Over Rate Cut

Fed members agreed, however, that they did not want to signal new cuts.
Lauren MuskettAugust 22, 2019

Minutes from the two-day meeting of the Federal Reserve last month show policymakers disagreed over the decision to cut interest rates by one-quarter of a percentage point.

The minutes of the July 30-31 discussions released Wednesday showed two officials said the Fed should cut its benchmark policy rate by a half-percentage point, double the quarter-point reduction the central bank eventually agreed upon.

Some argued for no rate cut at all, saying that the economy was beginning to improve after a soft patch in the spring.

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“Participants generally favored an approach in which policy would be guided by incoming information … and that avoided any appearance of following a preset course,” the minutes said.

The minutes said recent signs of the economy downturn and concerns about persistently low inflation were reasons for the cut. Fed officials also believed a rate cut would be a “prudent step from a risk-management perspective.”

The release of the minutes comes as the Fed faces ongoing criticism from President Donald Trump that the central bank is acting aggressively enough to spur the economy.

However, at the meeting last month, policy makers agreed they did not want to signal more rate cuts were coming.

“I think the thing that surprised me was how divided they were,” Mary Ann Hurley, vice president for fixed income trading at D.A. Davidson, said in an interview. “We’re really in uncharted territory. They are really concerned about doing or not doing the right thing.”

The minutes did not offer the pace of future cuts.

“There is little sign that the Fed is willing to push back on the markets,” said Michael Pearce, senior economist at Capital Economics. “As such, another (quarter-point) cut in September still looks like a good bet, if only because the Fed will not want to disappoint lofty market expectations.”

Scott Olson/Getty Images