MNI: Several Fed Officials Saw ‘Plausible’ Cut At July Meet
Several Federal Reserve policymakers were ready to cut interest rates as early as the central bank's last meeting in July as they focused increasingly on risks to the employment side of the mandate, minutes to the FOMC's July meeting showed Wednesday.
“All participants supported maintaining the target range for the federal funds rate at 5.25 to 5.5%, although several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision,” the minutes said.
“The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting.”
Fed officials are growing worried about the possibility that recent softening in the labor market could worsen as well.
“Upside risks to the inflation outlook were seen as having diminished, while downside risks to employment were seen as having increased,” the report said. “Some participants noted that as conditions in the labor market have eased, the risk had increased that continued easing could transition to a more serious deterioration.”
The minutes corroborate market expectations that the Fed is all but certain to cut interest rates at its meeting next month. Fed Chair Jerome Powell could offer further hints of the approaching start and pace of an easing cycle at this week’s Jackson Hole speech.
The Fed in its last meeting shifted its balance of risks to reflect a focus not just on inflation but also unemployment, which has risen to 4.3%, the highest since October 2021. The U.S. economy created 818,000 fewer jobs than originally reported in the 12-month period through March 2024, the Labor Department reported Wednesday.
Since the July meeting, market expectations for Fed cuts have fluctuated drastically, spiking after a weaker-than-expected employment report but then pulling back to show about a quarter point cut at each of this year's meetings after firmer figures on inflation and retail sales. They have since settled on the prospect of three cuts this year – one at each of the remaining meetings.