**MNI POLICY: FOMC Attuned to Global, Trade Risks: July Minutes>

--Top Takeaways From Minutes Of the July 30-31 FOMC Meeting

By Jean Yung 

     WASHINGTON (MNI) - Federal Reserve officials in July viewed global 

growth concerns and trade policy uncertainty as persistent headwinds for 

the U.S. economy, leading them to adjust rates a quarter-point lower to 

help recalibrate monetary policy, according to the minutes of the 

meeting released Wednesday. 

     They made no mention of further rate cuts, only pledging to be 

"flexible and focused" on incoming data. 

     FOMC officials also kicked off a series of discussions on potential 

changes to the policy framework but did not reach any conclusions. The 

issue of the standing repo facility did not come up. 

     The following are the key points from the minutes of the July 30-31 

FOMC meeting released Wednesday: 

     --Most FOMC officials viewed July's 25 bps rate cut as part of a 

"recalibration" of the stance of policy, "or mid-cycle adjustment" in 

response to a slowdown in business fixed investment and manufacturing 

and sluggish inflation. The cut was also prudent from a risk management 

perspective, they said. They did not make any specific reference 

to further rate cuts. 

     --Officials stressed the need to be "flexible" and "focused" on 

incoming data. Despite the U.S. and China's having reached an agreement 

to resume trade negotiations ahead of the July FOMC meeting, Fed 

officials were "mindful that trade tensions were far from settled and 

that trade uncertainties could intensify again." The trade war escalated 

shortly after the Fed's rate cut after Beijing allowed its currency to 

weaken and the Trump administration's announcement of additional tariffs 

on Chinese imports. 

     --In additional to trade uncertainties, officials judged that 

continued weakness in global economic growth remained a "signficant 

downside risk" and noted the increased likelihood of a no-deal Brexit. 

     --Several officials sided with dissenters Eric Rosengren and Esther 

George of the Boston and Kansas City Fed banks, respectively, and wanted 

no change to rates at the July meeting, citing strong data on the real 

economy. A few were concerned that further accommodation would prsent a 

risk to financial stability or be misinterpreted as a negative signal 

about the state of the economy. On the other hand, a couple officials 

preferred a 50 bps cut in July to better address low inflation.  

     --No new discussions over the launch of a standing repo facility or 

other balance sheet issues. July's decision to end run-offs two months 

earlier than planned was seen as "helpful" in simplifying communications 

and deemed to have "very small effects" on the balance sheet with 

"negligible" implications for the economic outlook. 

     --The FOMC kicked off internal discussions over revisions to its 

inflation targeting framework by noting that the success of any 

inflation "make-up" strategy would depend on the private sector's 

understanding of those strategies and the Fed's credbility to act as 

promised. Other ways of delivering average 2% inflation involve aiming 

for above-2% inflation or expressing its inflation target as a range. 

     --After reviewing its use of balance sheet policy and forward 

guidance over the past decade, a number of officials commented that the 

Fed may have been able to use balance sheet tools "even more 

aggressively" over the past decade, given the apparent lack of costs of 

such actions. 

     --The committee is set to discussion a number of other topics in 

its review, including conducting policy when rates are near zero and how 

to revise the Summary of Economic Projections and dot plot.      

     ** MNI Washington Bureau: 202-371-2121 ** 

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