The minutes from the latest Fed meeting show the bankers divided over what they think will happen next in the economy. The two things they found consensus on were lowering rates by 0.25% and then standing pat.
Given the different views, the minutes offered little guidance on what would cause policymakers to change their minds on the outlook.
The readout released on Wednesday of the Oct. 29-30 policy discussion, at which the Fed voted 8-2 to lower interest rates by a quarter percentage point, also showed policymakers further discussed the possibility of setting up a standing repo facility in the wake of recent ructions in short-term money markets.
The minutes read:
“Most participants judged that the stance of policy, after a 25 basis point reduction at this meeting, would be well calibrated to support the outlook of moderate growth, a strong labor market and inflation near the committee’s symmetric 2% objective.”
Fed Chair Powell said after the meeting than only a material change in the situation would change the Fed’s stance, but that left people wondering what would constitute such a change. Chances are, the Fed members are wondering the same thing.
The Fed has cut interest rates three times this year. The cuts have been positioned as “a mid-cycle adjustment” to help shield the U.S. economy from the effects of the U.S.-China trade war and slowing global growth, which have hurt manufacturing, business investment and exports.
The Fed is forecasting the economy growing 2.2% this year, slightly above its potential, which the central bank estimates at around 2%.
Some Fed members wanted to reduce rates, others didn’t. Broadly, the bankers see the economy in a good place and think inflation will move toward the Fed’s 2% goal.
The Fed has one more interest-rate setting meeting before the end of the year, on Dec.10-11, but few people think the bankers will do anything, unless we experience a material change, whatever that is.