Fed officials appeared to be divided on how far they should cut interest rates at their meeting earlier this month, but the entire group agreed that U.S. monetary policy will change in the coming weeks. They agreed that now is the time to avoid giving too specific guidelines regarding the possibility of such developments. First.
“The participants noted that monetary policy decisions do not follow a preset course, but are conditioned on economic developments and their impact on the economic outlook. The minutes of the November 6th and 7th meetings, published on Tuesday, make it clear that they are adjusting their policy stance.''
At its meeting three weeks ago, the Federal Reserve cut interest rates by a quarter of a percentage point to a range of 4.50% to 4.75% in response to Republican candidate Donald Trump's victory in the Nov. 5 presidential election.
Participants noted the complexity of current policy decisions, with “many” saying that recent volatility in economic indicators has made it important to identify underlying trends, and “many” saying that recent volatility in economic indicators has made it important to identify underlying trends. of participants indicated that the uncertainty surrounding the neutral interest rate made it difficult to make a decision. How much are current interest rates actually suppressing economic activity?
Some participants therefore noted that if inflation was too high, “the Committee could suspend policy rate easing and keep it at a suppressive level,” adding that “the labor market would “If there is a downturn or economic activity slows down, interest rate cuts could accelerate.” ”
“Many” officials argued that doubts about the true stance of monetary policy “made it appropriate to gradually ease policy restraints.”
After the minutes were released, financial markets slightly strengthened their expectations for a rate cut in December, but maintained their previous view that the pace of rate cuts next year would slow, with only one rate cut expected by mid-year. .
strong economy
Fed officials who attended the meeting appeared to avoid discussing the economic impact of Trump's upcoming return to office, according to minutes.
The meeting also raised concerns that monetary policy may not be as restrictive of the economy as expected after the release of stronger-than-expected economic data (which Fed Chairman Jerome Powell described as “surprising”). has increased.
Since the meeting, officials have said that with the economy continuing to perform well, the Fed's benchmark policy rate may already be close to a “neutral” level that neither stimulates nor suppresses activity. There is an argument that interest rate cuts should be approved more often at a slower pace in order to avoid easing. Policies may go too far and cause a resurgence of inflation.
Some argue that the economy is likely to slow and the job market remains weak, which is a reason to continue to ease monetary policy to encourage consumption and investment.
Investors still expect the Fed to cut rates by another 0.5 percentage point at its Dec. 17-18 meeting, but the probability of that happening has dropped from more than 80% in mid-October to about 60% now. There is.
