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Over Fed minutes, a Trump-shaped shadow



JACKSON HOLE, Wyo. (Reuters) – One thing that Federal Reserve officials broadly agreed at their last meeting was this: not to tip their hands about what's going on.

FILE PHOTOS: Microphones reach out to US President Donald Trump who casts a shadow while talking to reporters after his departure from the White House in Washington, USA, August 17, 2018. REUTERS / Kevin Lamarque / File Photo

Minutes released on Wednesday showed a crazy meeting on many fronts last month when a split Fed cut interest rates for the first time in ten years. But the agreement not to reveal their intentions was clear, and could show that the steady browsing of President Donald Trump has begun to influence how the Fed communicates.

Subcommittee, and it can throw markets off course – and draw more fire from Trump, who has been relentless in demanding nothing more than a wide range of interest rates and even a return to bond buying of the crisis to add to a softening, but still-increasing economy.

Overcommitted, and it looks like the White House capitulation, a possible blow to the Fed's perceived status as an independent, technical agency that does not consider politics in its political decisions.

Still, Trump has remained firm, especially as market data has indicated some doubt about the future of the US record expansion, that the Fed should act to strengthen an economy that works well on many fronts.

Safer in that situation "to be guided by incoming information and consequences for the economic outlook" and to avoid "any appearance of following a pre-set course" of further interest rate cuts – in other words to stay mum.

There were serious political disagreements at the last meeting when the Fed voted to cut the target rate by 25 basis points, the minutes of the meeting published Wednesday show.

Some did not want any cut at all, and two voting members disapproved. Some wanted a half-point cut, and in the last set of decision makers' financial projections, a close majority said interest rates would fall again by year-end.

But since then, in public, even those who wanted deeper cuts have called back their language a notch.

In a Financial Times column Wednesday, Minneapolis Fed President Neel Kashkari framed his call on the Fed to use more "forward guidance" in the form of a pledge not to raise interest rates – not a pledge to cut them.

In his first comments after the July meeting, St. Louis Federal Reserve President James Bullard said the Fed would not move again in response to changes in trade policy: It had purchased its "insurance" against the administration's trade war by cutting prices once and will now look at how the financial data reacts.

But a return to "computer addiction" at this time poses a dilemma for Fed Chairman Jerome Powell, due to speak here Friday in what will be a close watch at the central bank's annual political retreat in the Wyoming Mountains.

When bond markets again send a warning signal of the near future economic future as short-term interest rates move over the long-term, Powell may actually need to say more – about what the Fed plans, or at least what influences its thinking.

"(W) hat Powell has to say on Friday is going to be much, much more important than these minutes," said Mary Ann Hurley, vice president of interest rate fixing at D.A. Davidson in Seattle.

Is it inflation that is too weak, or the labor gain that may be too strong to sustain? If foreign data matter, would a German recession trigger lower US prices?

FILE PHOTO: Federal Reserve Building Depicted in Washington, DC, USA, August 22, 2018. REUTERS / Chris Wattie

“His most important message will be a combination of trying to arrest panic in fixed income markets without being seen as panicking for trump, says Adam Posen, president of the Peterson Institute for International Economics.

When they reduced the rates in July, contrary to the usual feeling of a strong consensus narrative about the reason, different makers seemed motivated by a large reason for justification.

White House claims were not among them. Fed officials insist they are not hostages to Trump. But he might be holding his tongue.

Reporting by Howard Schneider; Editing by Dan Burns and Lisa Shumaker

Our Standards: Thomson Reuters Trust Principles.

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