Adverse developments: US Fed members 'more concerned,' say recession risks rising: minutes

US Dollar Gyrates as FOMC Minutes Underscore Divided Fed

US Dollar Gyrates as FOMC Minutes Underscore Divided Fed

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 October 30 but rate cuts beyond this. start to look less like the insurance style cuts" that Powell has referred to. Some officials also pointed to models that in recent months indicated a rising likelihood of recession over the medium term.

They said uncertainty from tariffs could begin to ripple through to hiring and consumer spending, meeting minutes out Wednesday afternoon showed.

Officials expressed worry that weakness in business investment, trade and manufacturing could eventually erode consumer spending, which has been the main engine of growth for the USA economy in recent years. St. Louis Fed President James Bullard argued for a larger cut, while Kansas City Fed President Esther George and Boston Fed President Eric Rosengren voted to keep rates unchanged.

"Another rate cut as early as this month remains a real possibility, " agreed Sarah House, senior economist, Wells Fargo & Co., who attended the Denver conference. Five thought the rate cut was a mistake, and five thought it was appropriate but penciled in no further cuts.

"The Fed cut, and then cut again, and then cut a third time", he said.

Several Fed members justified last month's rate cut due to sluggish inflation readings, which still trail below the Fed's symmetric 2% target measured via core PCE inflation.

Some Fed officials may read softer economic data as confirmation of the slowdown they anticipated when they cut rates twice this summer, but others may see it as a more concerning development that warrants another cut this month.

One simple way to see what action the Fed might take is checking the futures contracts.Pat Shinn, certified financial planner with Heritage Asset Advisors, says these are the expectations of investors and speculators.

"Clearly things are slowing a bit", he said, noting that it is normal for long expansions to have such periods. The financial markets always scrutinize the minutes of the Fed for possible clues about future monetary policy. The development prompted a few officials to urge vigilance in monitoring "any sign of softening in labor market conditions".

While the outlook remains good for the moment - with strong jobs markets, historically low unemployment and the general public continuing to loosen purse strings - weaker recent economic data have put clouds on the horizon, the minutes from the Federal Reserve's September 17-18 meeting showed. They said that while they saw US growth as generally solid, the forecast risks "were tilted to the downside".

"Several participants suggested that the committee's post-meeting statement should provide more clarity about when the recalibration of the level of the policy rate in response to trade uncertainty would likely come to an end", the minutes said.

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