(Kitco News) – The Federal Open Market Committee (FOMC) once again acknowledged the weakening labor market, but expressed more concern about the impact of lower rates on inflation, and participants voiced “strongly differing views” on what to do at the December meeting, according to the minutes of the Federal Reserve’s October 28-29 meeting released Wednesday afternoon.
“In their consideration of monetary policy at this meeting, participants noted that inflation had moved up since earlier in the year and remained somewhat elevated,” the minutes stated. “Participants further noted that available indicators suggested that economic activity had been expanding at a moderate pace. They observed that job gains had slowed this year and that the unemployment rate had edged up but remained low through August. Participants assessed that more recent indicators were consistent with these developments. In addition, they judged that downside risks to employment had risen in recent months.”
“Against this backdrop, many participants were in favor of lowering the target range for the federal funds rate at this meeting, some supported such a decision but could have also supported maintaining the level of the target range, and several were against lowering the target range,” the report noted. Those who favored or could consider a rate cut said it was appropriate “because downside risks to employment had increased in recent months and upside risks to inflation had diminished since earlier this year or were little changed,” while those who preferred a hold “expressed concern that progress toward the Committee's inflation objective had stalled this year, as inflation readings increased, or that more confidence was needed that inflation was on a course toward the Committee's 2 percent objective, while also noting that longer-term inflation expectations could rise should inflation not return to 2 percent in a timely manner.”
Once again, one participant “agreed with the need to move toward a more neutral monetary policy stance but preferred a 1/2 percentage point reduction at this meeting.”
In their discussions on the outlook for monetary policy, FOMC members “expressed a range of views about the degree to which the current stance of monetary policy was restrictive.”
“Some participants assessed that the Committee's policy stance would be restrictive even after a potential 1/4 percentage point reduction in the policy rate at this meeting,” the report stated. “By contrast, some participants pointed to the resilience of economic activity, supportive financial conditions, or estimates of short-term real interest rates as indicating that the stance of monetary policy was not clearly restrictive.”
Participants also expressed “strongly differing views” about the upcoming December rate decision.
“Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate as the Committee moved to a more neutral policy stance over time, although several of these participants indicated that they did not necessarily view another 25 basis point reduction as likely to be appropriate at the December meeting,” the minutes said. “Several participants assessed that a further lowering of the target range for the federal funds rate could well be appropriate in December if the economy evolved about as they expected over the coming intermeeting period. Many participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year.”
All of the voting members agreed that monetary policy “was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risks.”
Spot gold saw a muted reaction to the FOMC minutes, declining by about $12 in the wake of the release but holding well above the session low of $4,055.47 set just after noon EST.
Spot gold last traded at $4,073.96 for a loss of 0.16% on the session.
