“Several noted that recent progress on inflation and increases in the unemployment rate had provided a plausible case for lowering the target range by 25 basis points at this meeting or that they might have supported such a decision,” said the minutes of the meeting, released on Wednesday (August 21) in Washington.
“The vast majority noted that if data continued to come in as expected, it would likely be appropriate to ease policy at the next meeting.”
The record of the meeting underscores an emerging sense among policymakers that the risks to achieving their inflation and employment goals are now roughly equal, even as borrowing costs remain at their highest level in two decades.
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Federal Reserve Chairman Jerome Powell said during a press conference on July 31 that the committee was looking for “greater confidence” that inflation is heading toward its 2% target before beginning to cut rates.
“Most participants noted that risks to the employment objective had increased, and many participants noted that risks to the inflation objective had decreased,” the minutes said. “Some participants noted the risk that further gradual easing of labor market conditions could lead to a more severe deterioration.”
A monthly employment report released after the meeting showed nonfarm payrolls growth slowed to 114,000 in July, about half the average pace of the first six months of the year. The unemployment rate rose to 4.3%, the highest since October 2021.
Policymakers noted that inflation had moderated and that there had been “some further progress” toward the 2% target in recent months. “Almost all participants noted that the factors that had contributed to the recent disinflation were likely to continue to exert downward pressure on inflation in the coming months,” the minutes said.
The consumer price index excluding food and energy rose 0.2% in July, and the three-month annualized figure, a signal of the short-term trend, rose just 1.6%, the lowest level since February 2021.
Powell can point to the latest figures to show that a quarter-point rate cut in September is unlikely to stoke inflation. The Fed chair is scheduled to speak about the economic outlook on Friday at an annual symposium hosted by the Kansas City Fed in Jackson Hole, Wyoming.
Since the July employment and inflation data were released, several Federal Reserve officials have said the time is approaching when it will be appropriate to cut rates. Futures markets are pricing in cuts of around 100 basis points over the rest of the year.
The minutes offered little indication of possible changes to the central bank’s continued reduction of its balance sheet, noting only that officials “judged that it was appropriate to continue the process of reducing the holdings of Federal Reserve securities.”
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