Fed minutes point to ‘likely’ rate cut coming in September

cnbc.com:

Federal Reserve officials at their July meeting moved closer to a long-awaited interest rate reduction, stopping short while indicating that a September cut had grown increasingly probable, minutes released Wednesday showed.

«The vast majority» of participants at the July 30-31 meeting «observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting,» the summary said.

Markets are fully pricing in a September cut, which would be the first since the emergency easing in the early days of the Covid crisis.

While all voters on the rate-setting Federal Open Market Committee voted to hold benchmark rates steady, there was an inclination among an unspecified number of officials to start easing at the July meeting rather than waiting until September.

The document stated that «several [meeting participants] observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.»

One basis point is 0.01 percentage point, so a 25 basis point reduction would be equivalent to a quarter percentage point.

In the parlance the Fed uses in its minutes, which do not mention names nor specify how many policymakers felt a certain way, «several» is a relatively small number.

However, the summary made clear that officials were confident about the direction of inflation and are ready to start easing policy if the data continues to cooperate.

The sentiment was twofold: Inflation markers had shown price pressures easing considerably, while some members noted concerns over the labor market as well as the struggles that