WASHINGTON — Federal Reserve officials were sharply divided when they voted to cut interest rates for the first time in a decade in late July, newly-released minutes from their meeting last month show.
Officials lowered borrowing costs by a quarter of a percentage point at their last meeting, citing slowing global growth, uncertainties from President Trump’s trade war and stubbornly low inflation.
Notes from the gathering show that “a couple” of participants at the meeting — not all of whom get to vote on monetary policy — would have preferred a larger half-point cut in the federal funds rate to shore up inflation.
But “several” wanted to hold rates steady, noting a strong job market and low unemployment. Two Fed officials voted against the decision to cut.
The division underlines the challenge of setting monetary policy at a time when Mr. Trump’s trade war with China is stoking uncertainty, casting a pall over the outlook for an otherwise decent-looking economy. Because it is unclear how much trade tensions will slow growth and whether they will eventually ease, Fed policy must aim at a moving target as it tries to keep the economy expanding steadily.
Given the uncertain backdrop, officials wanted to make sure they “avoided any appearance of following a preset course,” minutes from the meeting show. “Members generally agreed that it was important to maintain optionality” in setting interest rates.
Fed Chair Jerome H. Powell indicated at his post-meeting news conference that the Fed could make additional rate cuts, but did not commit to the timing or extent of future decreases. His comments, and in particular his characterization of the July move as part of a mid-cycle adjustment rather than the start of a series of cuts that will return borrowing costs to rock-bottom, disappointed some investors.
Market pricing suggests investors currently anticipate two or three more cuts before the end of the year, based on a tracking tool from CME Group.
Mr. Trump, who has criticized the Fed’s decision to raise rates last year, has increasingly pressured Mr. Powell to lower borrowing costs more aggressively. Mr. Trump on Wednesday told reporters that Mr. Powell “raised rates too fast, too furious.”
He repeated his previous view that if the central bank cuts rates further “you will see a rocket ship.” Earlier in the day, Mr. Trump lamented in a tweet that German government bond yields are negative while the United States continues to pay interest.
“WHERE IS THE FEDERAL RESERVE?” he wrote on Twitter.