WASHINGTON (AP) – Federal Reserve officials were sharply divided last month when they decided to cut the key policy rate for the second time this year, a split indicating that the road ahead for future interest rate cuts remains unclear.
However, a "pair" of participants indicated they agreed to a half-point reduction. They said that the larger interest rate cut would reduce the risk of a possible recession.
But a third group of "several participants" argued that the Fed should not cut interest rates at all, saying that the current outlook for the economy had changed little since the last central bank meeting.
This rare three-way split in the Fed's top policy panel indicates that Fed Chairman Jerome Powell can face challenges in reaching agreement on future investment rates.
Many investors hope the Fed will cut for the third time this year when it meets again at the end of this month.
The interest rate reduction in September, which followed a July cut that was the first in ten years, was approved with 7-3 votes. Two Fed officials, Esther George, president of the Fed's Kansas City Regional Bank, and Eric Rosengren, president of the Boston Bank, disapprove of no cuts.
James Bullard, president of the St. Louis Regional Bank, dissented in the other direction, arguing that the threats to the economy were large enough that a major cut was needed.
However, the protocol showed that there were other Fed officials who disagreed with the cut in the quarter, but not strong enough to dissent.
According to custom, the Fed does not call the Fed officials cited in the minutes, who were released after the usual three-week delay after a meeting.
The record showed that officials also discussed the turbulence in a short-term financing market called the repo market that happened during the week the central bank met.
In comments this week, Powell has stated that the Fed will take steps to deal with this turbulence.
The protocol showed that the options under discussion would be to allow the Fed's balance sheet to grow again. The Fed had reduced its holdings, which had risen to a peak of $ 4.5 trillion in the wake of the Great Recession as it engaged in several rounds of bond purchases aimed at lowering long-term interest rates and boosting the economy.
bond purchases became known as "quantitative relief." Powell said that while various alternatives were weighed to provide more stability for the short-term funding markets, efforts should not be considered a new round of quantitative easing.