Fed debated bigger rate cut, wanted to avoid appearing on path for more cuts

Fed debated bigger rate cut, wanted to avoid appearing on path for more cuts

By Jason Lange

WASHINGTON (Reuters) – The Federal Reserve debated cutting interest rates more aggressively at its last meeting, although central bankers were united in wanting to avoid the appearance of being on a path to more rate cuts, records from the meeting showed.

The U.S. central bank cut rates by 25 basis points at the close of its July 30-31 meeting, with minutes for the meeting published on Wednesday showing broad concern among policymakers over a global economic slowdown, trade tensions and sluggish inflation.

“A couple of participants indicated that they would have

preferred a 50 basis point cut,” according to the minutes, saying the policymakers favoring such a move were concerned by inflation being too low.

At the same time, the policymakers agreed they did not want to give the impression they were planning more rate cuts.

“Participants generally favored an approach in which policy would be guided by incoming information … and that avoided any appearance of following a preset course,” according to the minutes.

The meeting also included discussion of the Fed’s research into potential changes to its approach to setting policy. A number of policymakers said the Fed could have been more aggressive in using bond purchases to fight the 2007-09 recession.

However, policymakers also said tools like bond purchases and pledges about future policy might not be enough to eliminate the risk of policy being hampered in the future when the Fed’s benchmark rate gets close to zero.

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Source : Reuters Link

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