Federal Reserve officials have generally agreed that they are unlikely to need to cut interest rates again unless economic conditions change significantly, according to the minutes released Wednesday at their most recent meeting.
Central bankers in late October reduced their overnight interest rate by a quarter of a point to a range of 1.5% to 1.75%, the third such move in 2019.
However, in doing so "most" members of the Federal Open Market Committee considered the measures sufficient "to support the prospects of moderate growth, a strong labor market and inflation close to the Committee's 2% symmetrical target," he said. the summary of the meeting.
The policy position "would probably remain" where it is "as long as the information received about the economy did not result in a material re-evaluation of the economic outlook."
They argued, however, that the policy is not in a predefined course, even if it is likely to remain on hold, and members will continue to evaluate changes in data and overall prospects. Members often note that Fed policy adjustments work with a delay that may take a year or more to make, and want to see how a change to an easier policy will affect financial conditions. The cuts began in July, just seven months after the committee approved the fourth hike in 2018 rates.
These sentiments are largely in line with recent public statements by Fed officials.
President Jerome Powell, in a congressional statement last week, said he was also comfortable with the policy stance. This also includes the low likelihood of a rate hike: after the October 29-30 FOMC meeting, he further stated that he does not expect increases unless there is a significant increase in inflation.
Negative risks to the economy
Discussions at the meeting indicated that members feel that the US economy is in a very strong position, with a healthy labor market and a strong appetite for spending among consumers, whose activity accounts for about 70 percent of GDP.
However, they also see "the negative risks surrounding the economic outlook as high, further underscoring the case of a rate cut" at the October meeting. They cited reduced corporate investment and exports as a result of "weakness in global growth and high uncertainty about trade development".
They noted that concerns about both problems seemed to "have lessened a little."
The US and China are stuck in a two-year trade dispute that saw both sides leveling hundreds of billions of dollars in tariffs against each other. Recent headlines point to some thawing, although CNBC reported earlier this week that Beijing remains pessimistic that a deal will be made.
FOMC members who voted in favor of rate cuts also cited the benefits that lower rates would provide as an insurance policy against future problems. They also continued to express concern about inflation that is consistently below the Fed's 2% target. All but two committee members voted in favor of the cut, with dissidents believing that no additional accommodation was needed.
US economic activity probably slowed significantly in the fourth quarter. New York and Atlanta Fed's GDP trackers estimated fourth-quarter earnings at less than half a percent, although CNBC's Rapid Update indicator sees the figure at around 1.5%.
The Federal Open Market Committee released the minutes of its October 29-30 meeting on Wednesday. The committee voted to reduce its base interest rate by a quarter of a point to a range of 1.5% to 1.75%.