The minutes to the September 17-18 FOMC meeting, released this week, reiterated the divide among Fed officials about the cut in the Federal funds rate target at the September meeting and the need for future reductions. Members generally agreed that U.S. economic growth would moderate in the near term, but they had varying opinions on the magnitude of the impact of uncertainties on the economy and the likelihood of downside risks materializing. One primary concern stated repeatedly was that the weakness in business fixed investment and exports could translate to a reduction in hiring, which would weigh on household income and consumption.
Downside risks mentioned related to:
- trade policy uncertainty;
- fragile global economic conditions;
- geopolitical tensions in Hong Kong and the Middle East.
At the meeting the Fed cut its benchmark interest rate by a quarter point despite three regional presidents voting against the move (two wanted to hold rates steady while 1 wanted a greater cut).
Fed Funds futures currently are pricing in a 67% chance of another cut later this month.
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