Fed Minutes Show 'Many' Saw December Cut as Likely Not Appropriate

Watch Fed Minutes Show 'Many' Saw December Cut as Likely Not Appropriate - Bloomberg on Dailymotion

Transcript

00:00Well, the minutes show no surprise that there was a very divided Fed at the last meeting.

00:06Some thought that inflation was going to rise too high. Some thought that unemployment

00:11rise too high and nobody could agree on what to do at the December meeting.

00:16In general, they agreed that inflation had moved up, the economy was expanding at a moderate pace,

00:22and the unemployment rate remained low. But they did not agree on the outlook.

00:26Several said that inflation ex-tariffs was close to target, but many noted inflation had been above target

00:34for quite some time and showed little sign of returning to target.

00:38Several pointed to the persistence in core non-housing services as an inflation worry,

00:42as well as additional tariff-related inflation in core goods.

00:47Quote, several participants remarked that businesses, including those not directly affected by tariffs,

00:52indicated they planned to raise prices gradually in response to higher tariff-related input costs.

00:59At the same time, a few suggested AI-related productivity gains might help keep profit margins in line,

01:08limiting the pass-through of tariff costs.

01:11A few thought the softening labor market would keep prices in check, as would recent changes in immigration.

01:17A couple said, in general, officials saw elevated risks to the labor market,

01:24a few noting the impact on groups historically more sensitive to economic cycles,

01:28and some noting the apparent divergence between the subdued job growth we'd seen and the relatively strong GDP.

01:36A few saw a risk that trade tensions could weigh on economic activity.

01:41And the Minutes say, against this backdrop, many participants were in favor of lowering the target range

01:47for the federal funds rate at that meeting.

01:50Some supported such a decision, but could have also supported maintaining the level of the target range,

01:55and several were against lowering the target range.

01:59In discussing the near-term course of monetary policy,

02:03participants expressed strongly differing views about what the policy decision would be

02:08that would be most likely appropriate at the committee's December meeting.

02:12In other words, guys, everything we thought we knew, the Minutes basically confirm,

02:17they didn't know what was going to happen with the economy, and they are pretty divided over that.