Fed officials mull September rate cut: minutes

Washington. Federal Reserve officials were strongly leaning toward a rate cut at their September policy meeting, with several even reportedly willing to immediately lower borrowing costs, according to minutes from the latest meeting.

U.S. central bank policymakers kept rates unchanged at the Federal Open Market Committee meeting on July 30-31, but opened the door to a cut at the session on September 17-18.

As inflationary pressures ease, financial markets expect the Fed to cut its benchmark rate next month by a quarter of a percentage point from the current range of 5.25-5.50 percent, where it has been pegged for more than a year.

A relaxation of up to one percentage point is expected by the end of the year.

At the July meeting, “the vast majority” of policymakers “noted that if the data remained more or less as expected, it would likely be appropriate to ease monetary policy at the next meeting,” according to the minutes published on Wednesday.

They also noted that “many” Fed officials viewed the rate stance as restrictive and that “a few participants” argued that, amid continued cooling in inflationary pressures, no rate change would mean that monetary policy would further drag on economic activity.

The minutes indicated that while all officials agreed to hold rates steady in July, “several” said progress in reducing inflation amid rising unemployment “had provided a plausible case for lowering the target range by 25 basis points at this meeting or might have supported such a decision.”

The case for a Fed rate cut is based on price pressures receding toward the central bank’s 2 percent target and increasing anxiety about the labor market situation following recent data showing a rise in the unemployment rate.

The speed of the jump in the unemployment rate, which hit a low of 3.4 percent early last year and has since climbed to 4.3 percent in July, has added urgency to the debate over rate cuts and led some analysts to say a half-percentage point reduction in borrowing costs should be considered in September.