US Fed officials see "strengthened" case for rate cut, minutes show

Galtero Lara
Julio 12, 2019

He also said that the strong U.S. June jobs report didn't affect his view of monetary policy.

Other policymakers have said the case for a cut is not clear cut. "But they are cautious.They haven't stopped, they've just slowed". Bostic is not a voting member of the Fed's interest-rate committee but will be in 2021.

The tariffs were not levied, but "it was a bit of a confidence shock, Powell told the Senate Banking Committee". "The arguments, for adding policy accommodation have strengthened over time".

Eight of 17 Fed officials expected the central bank to lower rates by the end of the year, while another eight saw no change and one projected a rate increase, according to updated quarterly forecasts of the federal funds rate released last month. But they will participate in the debate when the Fed meets in three weeks in a session widely expected to reduce the Fed's overnight target interest rate by at least a quarter of a percentage point.

"Powell is setting it up, certainly for a July rate cut", said Jack Ablin, chief investment officer at Cresset Capital Management in Chicago.

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Powell, in appearances on Capitol Hill this week, bolstered expectations such a cut is coming, and focused on the need to protect the United States against fallout from a weak global economy.

The minutes came after Fed Chairman Jerome Powell said earlier in the day that crosscurrents such as trade tensions and concerns about global growth have been weighing on the US economic activity and outlook. Almost all officials cut their forecasts for the short-term rate that the Fed controls, compared to the previous meeting, the minutes said.

But the US central bank is now laying the groundwork for its first policy shift triggered by tweets, as Fed officials grapple with how the ground shifted on May 30 when US President Donald Trump threatened on Twitter to impose new import tariffs on Mexico if it did not agree to curb the flow of migrants across the US-Mexico border.

With the Fed's current preferred measure of inflation running at 1.6%, below the 2% target, some policymakers argue the central bank needs to do more or risk losing public trust that it takes the target seriously. "We have issues around inflation expectations being soft, and obviously inflation data continuing to run below 2%".

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