Most Fed Officials Supported Rate Cuts
Fed minutes show most officials backed a September rate cut, noting rising unemployment risks and easing inflation, a move that could gradually lower mortgage rates.
WASHINGTON — Most members of the Federal Reserve's interest-rate setting committee supported further reductions to its key interest rate this year, according to minutes from last month's meeting released Wednesday.
A majority of Fed officials felt that the risk unemployment would rise had worsened since their previous meeting in July, while the risk of rising inflation “had either diminished or not increased,” the minutes said. As a result, the central bank decided at its Sept. 16-17 meeting to reduce its key rate by a quarter-point to about 4.1%, its first cut this year.
Rate cuts by the Fed can gradually lower borrowing costs for things like mortgages, auto loans, and business loans, encouraging more spending and hiring.
Still, the minutes underscored the deep division on the 19-person committee between those who feel that the Fed's short-term rate is too high and weighing on the economy, and those who point to persistent inflation that remains above the central bank's 2% target as evidence that the Fed needs to be cautious about reducing rates.
The minutes provide insight into how the Fed's policymakers were thinking last month about inflation, interest rates, and hiring. Since then, however, the federal government shutdown has cut off the flow of economic data that the Fed relies on to inform its decisions. The September jobs report wasn't issued as scheduled last Friday, and if the shutdown continues, it could also delay the release of the inflation report set for next Wednesday.
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