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Members of the Federal Reserve’s policy-setting committee expressed “strongly differing views” over whether to cut rates next month, according to minutes of the central bank’s October meeting.
Fed policymakers were deeply divided on the need for a third rate cut this year, according to a record of their most recent meeting released on Wednesday, underlining the deepening schism over borrowing costs at the US central bank.
“In discussing the near-term course of monetary policy, participants expressed strongly differing views about what policy decision would most likely be appropriate at the committee’s December meeting,” the minutes said.
The minutes underline the divergence in opinion between Fed policymakers who have been split over the pace and scale of rate cuts this year as inflation creeps upwards and the labour market weakens.
Fed chair Jay Powell indicated in a press conference following the October meeting that the outcome for December was not “a foregone conclusion”. But Wednesday’s minutes underline the extent of the disagreement over the best way forward on monetary policy.
The minutes showed that “most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate” but “several of these participants” indicated they felt December might be too soon for a further cut.
The Federal Open Market Committee opted in October to lower rates by 0.25 percentage points for the second time this year. But the vote saw a rare three-way split, with Trump ally Stephen Miran backing a half-point cut, while Kansas City Fed president Jeff Schmid called for rates to be held steady.
There are increasing doubts on Wall Street as to whether the Fed will continue to reduce borrowing costs at its next meeting in December.
The probability of another quarter-point cut has fallen from a near certainty to about 30 per cent over the past month, according to CME Group data, as a number of senior Fed officials voiced their opposition to such a move.
Hawks, such as Schmid, Boston Fed president Susan Collins and governor Michael Barr have said inflation is still too high at 3 per cent, while growth has remained unexpectedly resilient.
But more dovish members have argued a soft labour market warrants a further cut. Christopher Waller, the leading internal candidate to take over as Fed chair next year, said this week that the labour market was “still weak and near stall speed”.
The Fed’s decision has been further complicated by the recent government shutdown, which delayed the release of critical reports used to gauge the health of the economy, prompting some policymakers to call for a more cautious approach until a clearer picture emerges.
The Bureau of Labor Statistics said on Wednesday it would not publish a report on the employment situation for October as it had been unable to collect data from households during the shutdown that “is not able to be retroactively collected”. Partial information on the October labour market will be wrapped into the November report.
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