sunny.png
Sunday October 20th, 2019 1:20PM

Fed officials were sharply divided over September rate cut

By The Associated Press
Related Articles
  Contact Editor

WASHINGTON (AP) — Federal Reserve officials were sharply divided last month when they decided to cut their key policy rate for a second time this year, a split that indicates the path forward for future rate cuts remains cloudy.

Minutes of the discussion at the September meeting released Wednesday showed that the majority of Fed officials believed a second quarter-point cut was appropriate given increased economic uncertainty from trade tensions and a slowing global economy.

However, a "couple" of participants indicated they favored a half-point reduction. They said the larger rate cut would reduce the risks of a possible recession.

But a third group of "several participants" argued that the Fed should not be cutting rates at all, saying that the current outlook for the economy had changed little since the central bank's last meeting.

This rare three-way split on the Fed's top policy panel indicates that Fed Chairman Jerome Powell may face challenges in reaching consensus on future moves on rates.

Many investors are hoping the Fed will cut rates for a third time this year when it meets again at the end of this month. The Fed's benchmark rate currently stands in a range of 1.75% to 2% with the next meeting coming on Oct. 29-30.

The CME Group, which tracks futures trading on the Fed's policy rate, is currently putting the chance of a third cut in October at around 84%.

Chris Rupkey, chief financial economist at MUFG, a global financial group, said, "We would bet that Powell will deliver the third rate cut the markets are clamoring for on Oct. 30 but rate cuts beyond this ... start to look less like the insurance style cuts" that Powell has referred to.

Michael Pearce, senior U.S. economist at Capital Economics, said he found the minutes "noticeably ambivalent" about the timing of the next cut. He said many Fed officials may be nearing the limits of how far they are comfortable cutting rates in the face of trade uncertainty and would prefer to "wait instead for more concrete signs of weakness in the incoming data."

The September rate cut, which followed a cut in July that was the first in a decade, was approved on a 7-3 vote. Two Fed officials, Esther George, president of the Fed's Kansas City regional bank, and Eric Rosengren, president of the Boston bank, dissenting in favor of no cut.

James Bullard, president of the St. Louis regional bank, dissented in the other direction, arguing that the threats to the economy were large enough that a bigger cut was needed.

The minutes however showed that there were other Fed officials who disagreed over the quarter-point rate cut although not strongly enough to dissent.

Following custom, the Fed does not name the Fed officials cited in the minutes, which were released after the customary three-week delay following a meeting.

The minutes showed officials also discussed the turbulence in a short-term funding market called the repo market that occurred in the week the central bank was meeting.

In remarks this week, Powell has said the Fed will be taking moves to deal with this turbulence.

The minutes showed that among the options discussed would be to allow the Fed's balance sheet to grow again. The Fed had been reducing its holdings that had surged to a peak of $4.5 trillion in the wake of the Great Recession as it engaged in several rounds of bond purchases aimed at lowering long-term rates and giving the economy a boost.

Those bond purchases were known as "quantitative easing." Powell said that while various options were being weighed for providing more stability for the short-term funding markets, the effort should not be considered a new round of quantitative easing.

  • Associated Categories: Associated Press (AP), AP Business, AP Business - Economy, AP Business - Industries, AP Business - Financial Services
© Copyright 2019 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Fed officials were sharply divided over September rate cut
Minutes show Fed officials sharply divided over September rate cut, leaving future path unclear
2:33PM ( 6 minutes ago )
The Latest: Security Council to discuss Turkish operation
U.N. diplomats say the Security Council will hold a closed meeting Thursday on Turkey's military action in northeast Syria
2:23PM ( 16 minutes ago )
The Latest: Site says Germany shooting video streamed live
German city on Yom Kippur, Judaism's holiest day
2:22PM ( 17 minutes ago )
Associated Press (AP)
Facebook CEO to appear before Congress on currency plan
Facebook CEO Mark Zuckerberg will appear before Congress this month as the tech giant is under pressure from lawmakers and regulators over its massive market power and record of privacy breaches.
2:06PM ( 33 minutes ago )
Fed officials sharply divided over September rate cut
Minutes show Fed officials sharply divided over September rate cut, leaving future path unclear
2:06PM ( 33 minutes ago )
German synagogue is attacked on holy day; 2 dead nearby
A heavily armed assailant tried to force his way into a synagogue in eastern Germany on Wednesday and two people were killed as he fired shots outside the building and into a kebab shop
1:56PM ( 44 minutes ago )
AP Business
EU sees hope in Brexit talks; Irish leader sees wide gaps
The European Union is maintaining a semblance of hope that the acrimonious fight over Britain's departure from the bloc could somehow still be settled amicably
12:12PM ( 2 hours ago )
US job openings slip 1.7% in August as labor market slows
US job openings slip 1.7% in August as labor market loses momentum
11:03AM ( 3 hours ago )
Global plan aims to better tax digital business
The Organization for Economic Cooperation and Development has proposed a plan to overhaul the way multinationals - particularly tech giants - are taxed to make sure they pay their fair share in countries where they do significant business
9:18AM ( 5 hours ago )
AP Business - Economy
The Latest: California power outages have many scrambling
Residents of Sonoma in California's wine country are swarming to the few businesses opened in the town's square amid a power outage expected to last for days
12:08PM ( 2 hours ago )
The Latest: Nobel winner hopes for more breakthroughs
Nobel chemistry prize winner M. Stanley Whittingham says he hopes the award for work on lithium-ion batteries will "push the field further and faster."
11:50AM ( 2 hours ago )
The Latest: Bay Area tunnels open during imposed blackout
The California Transportation Department says two tunnels in the San Francisco Bay Area that depend on electricity to function will remain open during a power outage affecting a large swath of Northern California
10:32AM ( 4 hours ago )
AP Business - Industries
Powell sees cooler US hiring in possible hint of rate cuts
Fed Chair Powell sees cooler US job market after data changes
5:04PM ( 21 hours ago )
Aging Holocaust survivors try to sue over Nazi-era insurance
Holocaust survivors seek access to U.S. courts over billions of dollars in insurance policies that were never honored by Nazi-era companies
5:00PM ( 21 hours ago )
World Bank: Trade tensions could block path out of poverty
World Bank: Trade tensions could block path out of poverty for world's developing countries
4:04PM ( 22 hours ago )
AP Business - Financial Services
The Latest: Security Council to discuss Turkish operation
U.N. diplomats say the Security Council will hold a closed meeting Thursday on Turkey's military action in northeast Syria
2:23PM ( 17 minutes ago )
The Latest: Site says Germany shooting video streamed live
German city on Yom Kippur, Judaism's holiest day
2:22PM ( 17 minutes ago )
Woman accuses Matt Lauer of rape; former anchor denies claim
A woman who worked at NBC News claims that former anchor Matt Lauer raped her at a hotel while on assignment for the Sochi Olympics
2:20PM ( 20 minutes ago )
The Latest: California utility: Power out through Thursday
California's largest utility says as many as 2 million people will remain without power at least through Thursday as a precaution to protect against wildfires
2:18PM ( 22 minutes ago )
Turkey begins offensive aimed at Kurdish fighters in Syria
Turkish President Recep Tayyip Erdogan says Turkey has begun a military operation against Kurdish fighters in Syria
2:18PM ( 22 minutes ago )