Highlights
When the FOMC met three weeks ago, the participants broadly found that the US economy was expanding moderately in the third quarter and at much the same pace as the second quarter 2024. They had confidence that inflation was sustainably nearing the 2 percent objective and that disinflation was continuing for goods and many services, although measured costs in the housing sector had yet to reflect easing of rents on an annual basis. However, inflation was still said to be"elevated". The labor market was generally deemed"solid" and likely to remain that way.
The minutes said,"In participants' evaluation of the risks and uncertainties associated with the economic outlook, upside risks to the inflation outlook were seen as little changed, while downside risks to employment and growth were seen as having decreased somewhat." Overall,"Almost all participants judged the risks to the attainment of their dual-mandate objectives of maximum employment and price stability to be roughly in balance."
Upside risks to inflation were from"the possibility of sudden disruptions in global supply chains due to geopolitical developments, a larger-than-anticipated easing in financial conditions, stronger-than-expected consumption, more-persistent shelter price increases, or sharp rises in insurance charges for health, autos, or homes." Downside risks included"weaker global growth, sharply worsening financing conditions due to an escalation of geopolitical tensions or a sizable asset price correction, or an unwelcome weakening of the labor market.
Risks to financial stability were varied. Some were related to lingering problems in the banking system from"unrealized losses on bank assets", and"vulnerabilities associated with CRE exposures, focusing on risks in the office sector". The minutes also said,"A couple of participants noted concerns about asset valuation pressures in other markets. Some participants commented on cyber risks that could impair the operation of financial institutions, financial infrastructure, and, potentially, the overall economy; these participants noted, in particular, vulnerabilities that could emanate from third-party service providers." There were some concerns that"leverage in the market for Treasury securities remained a risk and commented that it would be important to monitor developments regarding the market's resilience."
The decision to cut the fed funds target rate range by 25 basis points was unanimous to"recalibrate" the stance of policy as appropriate and"would help maintain the strength in the economy and labor market while continuing to enable further progress on inflation" was which still considered elevated.
The minutes provided no specific signal for the next steps for the FOMC. The committee was aware that further steps would have to be taken in the context of the available data and respond accordingly. The minutes said,"Participants noted that monetary policy would need to balance the risks of easing policy too quickly, thereby possibly hindering further progress on inflation, with the risks of easing policy too slowly, thereby unduly weakening economic activity and employment. In discussing the positioning of monetary policy in response to potential changes in the balance of risks, some participants noted that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated, and some remarked that policy easing could be accelerated if the labor market turned down or economic activity faltered. Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually."
The minutes said,"In participants' evaluation of the risks and uncertainties associated with the economic outlook, upside risks to the inflation outlook were seen as little changed, while downside risks to employment and growth were seen as having decreased somewhat." Overall,"Almost all participants judged the risks to the attainment of their dual-mandate objectives of maximum employment and price stability to be roughly in balance."
Upside risks to inflation were from"the possibility of sudden disruptions in global supply chains due to geopolitical developments, a larger-than-anticipated easing in financial conditions, stronger-than-expected consumption, more-persistent shelter price increases, or sharp rises in insurance charges for health, autos, or homes." Downside risks included"weaker global growth, sharply worsening financing conditions due to an escalation of geopolitical tensions or a sizable asset price correction, or an unwelcome weakening of the labor market.
Risks to financial stability were varied. Some were related to lingering problems in the banking system from"unrealized losses on bank assets", and"vulnerabilities associated with CRE exposures, focusing on risks in the office sector". The minutes also said,"A couple of participants noted concerns about asset valuation pressures in other markets. Some participants commented on cyber risks that could impair the operation of financial institutions, financial infrastructure, and, potentially, the overall economy; these participants noted, in particular, vulnerabilities that could emanate from third-party service providers." There were some concerns that"leverage in the market for Treasury securities remained a risk and commented that it would be important to monitor developments regarding the market's resilience."
The decision to cut the fed funds target rate range by 25 basis points was unanimous to"recalibrate" the stance of policy as appropriate and"would help maintain the strength in the economy and labor market while continuing to enable further progress on inflation" was which still considered elevated.
The minutes provided no specific signal for the next steps for the FOMC. The committee was aware that further steps would have to be taken in the context of the available data and respond accordingly. The minutes said,"Participants noted that monetary policy would need to balance the risks of easing policy too quickly, thereby possibly hindering further progress on inflation, with the risks of easing policy too slowly, thereby unduly weakening economic activity and employment. In discussing the positioning of monetary policy in response to potential changes in the balance of risks, some participants noted that the Committee could pause its easing of the policy rate and hold it at a restrictive level if inflation remained elevated, and some remarked that policy easing could be accelerated if the labor market turned down or economic activity faltered. Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually."
Definition
Detailing the issues of debate and consensus among policymakers, the Federal Open Market Committee issues minutes of its latest meeting three weeks after the meeting.
Description
The FOMC has changed dramatically in the transparency of its operations. It now discloses policy changes at the end of each meeting. Historically, the Fed used to keep investors guessing about policy changes and Fed officials did not appear on the speaking circuit as frequently as they do now.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.
The Fed's minutes are a market mover as investors and analysts parse each word looking for clues to policy. The minutes include the complete economic analysis compiled by Fed officials and opinions at odds with the consensus.
Investors who want a more detailed description of Fed opinions will generally read the minutes closely. Fed officials also make numerous speeches, which give their views to the public at large.
