Federal Reserve July 2024 Meeting Minutes

Minutes of the U.S. Federal Reserve’s July meeting showed that Fed officials moved closer to a long-awaited interest rate cut, but stopped short of signaling that a September rate cut was increasingly likely.

The summary said that the “vast majority” of participants at the July 30-31 meeting “note that if data continue to flow in as expected, it is likely to be appropriate to ease policy at the next meeting.”

Markets are fully pricing in a cut in September, which would be the first since emergency easing in the early days of the Covid-19 crisis.

While all voters on the interest-rate-setting Federal Open Market Committee voted to keep benchmark rates steady, there was a tendency among an unspecified number of officials to start easing at the July meeting rather than waiting until September.

The document stated that “many of the [meeting participants] They noted that recent progress in dealing with inflation and high unemployment provided a reasonable case for reducing the target range by 25 basis points at this meeting or that they might have been able to support such a decision.

One basis point is equal to 0.01 percentage point, so a cut of 25 basis points would be equivalent to a quarter of a percentage point.

In the language the Fed uses in its minutes, which does not name names or specify how many policymakers felt a certain way, “several” is a relatively small number.

However, the summary made clear that officials are confident about the direction of inflation and are ready to start easing monetary policy if data continues to cooperate.

The sentiment was dual: inflation indicators showed price pressures had eased significantly, while some members noted concerns about the labor market as well as the struggles faced by households, especially those at the lower end of the income spectrum, in the current environment.

“On inflation expectations, participants saw that recent data had increased their confidence that inflation was moving sustainably toward 2 percent,” the minutes said. “Almost all participants noted that the factors that had contributed to the recent decline in inflation were likely to continue to weigh on inflation in the months ahead.”

Regarding the labor market, “several” officials indicated that “the announced gains in salaries may be exaggerated.”

Earlier on Wednesday, the Bureau of Labor Statistics, in a preliminary revision of nonfarm payrolls figures from April 2023 to March 2024, said the gains may have been overstated by more than 800,000 jobs.

“A majority of participants indicated that risks to the employment target had increased, and several participants indicated that risks to the inflation target had decreased,” with some participants noting the risk that further gradual easing of labor market conditions could turn into a more serious deterioration.

In its statement following the meeting, the committee noted that job gains had slowed and that inflation had also “declined.” However, the committee chose to leave the benchmark federal funds rate unchanged, currently targeting a range of 5.25% to 5.50%, a 23-year high.

Markets rose on the day of the Federal Reserve meeting but fell in subsequent sessions amid concerns that the central bank is moving too slowly in easing monetary policy.

The day after the meeting, the Labor Department reported an unexpected rise in jobless claims, while a separate indicator showed the manufacturing sector contracted more than expected. Things got worse when the July nonfarm payrolls report showed just 114,000 new jobs and the unemployment rate rose another 1.3 percent.

Calls have been growing for the Federal Reserve to cut interest rates quickly, with some even suggesting the central bank could make moves between meetings to head off fears that the economy is deteriorating rapidly.

But the panic did not last long. Subsequent data showed jobless claims falling to historically normal levels, inflation indicators showed price pressures easing, and retail sales data came in better than expected, easing concerns about consumer pressures.

But more recent indicators have pointed to labor market pressures, and traders largely expect the Federal Reserve to begin cutting interest rates in September.