Key Takeaways
- The minutes of the Federal Reserve’s late-July policy meeting show that most officials supported possible interest-rate cuts at the next meeting in September.
- The minutes showed that a “vast majority” of officials said an interest rate cut at the September meeting was likely if data continued to meet expectations.
- Meanwhile, “several” were up for cutting rates at the July meeting, when the Fed kept rates at their highest level in 23 years.
- Economists noted support for rate cuts may be even stronger now, as the meeting occurred before the release of July’s weak jobs report.
Meeting minutes released Wednesday bolstered confidence that an interest rate cut is likely in September, but it’s still unclear how many members of the Federal Reserve will support the decision.
According to the minutes of the central bank’s policy meeting on July 30-31, most of the Federal Open Market Committee (FOMC) members supported lowering interest rates from their decades-high levels. But maybe not all of them, as the minutes showed some disagreement on when it would be appropriate to act.
“The vast majority observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,” the minutes said.
The statement implied that at least one or more members were still unsure about an interest rate cut, as other sections noted when opinions were unanimous.
Some Officials Were Willing to Cut Rates in July
Investors and economists forecast that after a year of holding the influential fed funds rate at 5.25% to 5.5%, the Fed will cut rates for the first time in more than four years at its September meeting.
The July meeting minutes not only showed more Fed officials coalescing behind the idea of a rate cut but also that some believed that the central bank should have begun cutting rates at the July meeting. While all of the officials at the meeting supported the decision to leave rates unchanged, the minutes noted that “several” officials were willing to vote for a rate cut at the meeting.
Since the minutes reflect economic conditions at the end of July, central bankers didn’t have all of the economic data released since, such as the July jobs report that pointed to weakness in the labor market, wrote Bret Kenwell, U.S. investment analyst at eToro.
Fed officials have said they are shifting their attention from fighting inflation to preventing unemployment and weakness in the labor market would make them more likely to cut rates.
Fed Chair Powell’s Comments to be Closely Watched
Investors will closely monitor Federal Reserve Chair Jerome Powell’s upcoming remarks. On Friday, he is expected to give more details about the Fed’s policy timeline at the Jackson Hole Economic Symposium.
“A rate cut on Sept. 18 was being teed up at the end of last month,” wrote BMO Economist Michael Gregory. “Market attention now turns to Powell’s Friday speech at Jackson Hole for further corroboration.”