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Further US rate cuts still expected despite divisive FOMC meeting

Jeffrey Tan
Jeffrey Tan8/23/2019 06:30 AM GMT+08  • 4 min read
Further US rate cuts still expected despite divisive FOMC meeting
SINGAPORE (Aug 26): The minutes of the Federal Open Market Committee’s July 31 meeting have indicated that the officials were widely divided in the US Federal Reserve’s decision to ease monetary policy.
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SINGAPORE (Aug 26): The minutes of the Federal Open Market Committee’s July 31 meeting have indicated that the officials were widely divided in the US Federal Reserve’s decision to ease monetary policy.

While most Fed officials voted to cut the interest rate by 25 basis points, “a couple” of members were more hawkish, preferring a reduction of 50bps instead. Their stance was justified on the premise that “stronger action” was needed to address “stubbornly low inflation”. On the other side of the fence, Boston Fed president Eric Rosengren and Kansas Fed president Esther George wanted to keep interest rates unchanged, as they were convinced that “the real economy continued to be in a good place”.

Indeed, the diversity in views could complicate issues facing the Fed, especially since the market is anticipating another interest rate cut before the year ends. For one, fears of a recession have intensified following the inversion of the US yield curve. This is compounded by slowing global growth and the unresolved trade tensions between the US and China. Fed officials will meet again in September.

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