Largely mirroring Federal Reserve Chairman Jerome Powell’s remarks in Congressional testimony earlier in the day, the minutes of the central bank’s June meeting released Wednesday afternoon said many participants believe the case for lowering interest rates has strengthened.
The minutes of the latest Fed meeting noted nearly all participants downwardly revised their assessment of the appropriate path for rates due to global developments that led to heightened uncertainties about the economic outlook.
“Many judged additional monetary policy accommodation would be warranted in the near term should these recent developments prove to be sustained and continue to weigh on the economic outlook,” the Fed said.
The central bank added, “Several others noted that additional monetary policy accommodation could well be appropriate if incoming information showed further deterioration in the outlook.”
The minutes revealed several participants believe a near-term rate cut could help cushion the effects of possible future adverse shocks to the economy and, hence, is appropriate from a risk-management perspective.
Some participants also warned a continued shortfall in inflation risked a softening of inflation expectations that could slow the sustained return of inflation to the Fed’s 2 percent target.
The Fed voted to leave the target range for rates at 2.25 to 2.50 percent at the meeting, although St. Louis Fed President James Bullard preferred cutting rates by 25 basis points to re-center inflation and inflation expectations.
Reflecting Powell’s previously mentioned crosscurrents, such as trade tensions and concerns about global growth, many participants believe the risks to their growth and inflation projections are now weighted to the downside.
“While they continued to view a sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective as the most likely outcomes, many participants attached significant odds to scenarios with less favorable outcomes,” the Fed said.
The minutes added, “Many participants noted that, since the Committee’s previous meeting, the economy appeared to have lost some momentum and pointed to a number of factors supporting that view.”
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