The Federal Open Market Committee cut, but the future is uncertain. Markets expected a further fall in December, but “many” officials said no additional cuts are needed until 2025.
“Several participants assessed that a further lowering of the federal funds rate target range could well be appropriate in December if the economy evolved about as they expected over the coming intermeeting period,” the minutes said. “Many participants suggested that, given their economic outlooks, the target range should remain unchanged for the year.”
Fed says “many” instead of “several,” opposing a December cut. Not all “participants” vote. The meeting has 19 attendance, but only 12 vote, so it’s unclear how they feel about a December transfer.
The memo matches Fed Chair Jerome Powell’s post-meeting presser. Powell told reporters December cuts were not “foregone conclusion.”
At the December Committee meeting, members disagreed on the best short-term monetary policy alternative, the minutes indicated.
Traders were expecting another move on Dec. 9-10 before Powell’s statement. CME Group’s FedWatch futures price indicator showed that reduced to 1 in 3 by Wednesday afternoon. January cuts are 66% expected.
According to the minutes, “most participants” expected additional cuts, but not in December.
The FOMC cut the overnight borrowing rate by 0.25% to 3.75%-4%. The 10-2 vote did not indicate officials’ splitness at a non-dissenting institution.
Low labor market and inflation that has “shown little sign of returning sustainably” to the Fed’s 2% goal alarmed officials. The minutes showed committee factions.
“Against this backdrop, many participants were in favor of lowering the federal funds rate target range at this meeting, some supported such a decision but could have also supported maintaining it, and several were against it,” the minutes noted.
Dove inflation Public statements by Governors Stephen Miran, Christopher Waller, and Michelle Bowman favor cuts to shore up the labor market. Hawkish members including Kansas City President Jeffrey Schmid, Boston President Susan Collins, and St. Louis President Alberto Musalem think reducing more could harm the Fed’s 2% inflation aim.
Powell, Jefferson, and Williams are patient moderates.
The minutes stated that “one participant,” Miran, advocated a more harsh half-point cut. Schmid also voted no to avoid cutting.
Meeting minutes show the 44-day federal government shutdown affected decision-making by limiting data. Labor market, inflation, and other indicators were halted by the standoff. Bureau of Labor Statistics and Bureau of Economic Analysis have announced release dates.
Powell compared it to “driving in the fog,” but Waller said Monday the Fed had enough data to make policy.
Minutes covered policy balance sheets. The FOMC finished lowering Treasury and mortgage-backed securities in December, erasing almost $2.5 trillion from the balance sheet, still $6.6 trillion. Stopping quantitative tightening was popular.