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June FOMC minutes show more Fed officials in favor of rate cut

The latest FOMC meeting shows more Fed officials wanting to cut interest rates in the future.

Federal Reserve building after June FOMC minutes Source: Bloomberg

Recent minutes from the latest Federal Open Market Committee (FOMC) meeting show a growing willingness to cut interest rates. Though the US Federal Reserve kept interest rates unchanged, the June FOMC minutes show increasing support for a future rate cut.

FOMC members cite economic uncertainty in growing support for interest rate cut

According to the FOMC meeting minutes, Fed officials saw global economic troubles such as the US-China trade impasse as a reason to possibly reduce interest rates in the future.

‘Participants generally agreed that downside risks to the outlook for economic activity had risen materially since their May meeting, particularly those associated with ongoing trade negotiations and slowing economic growth abroad,’ noted the minutes.

‘Many judged additional monetary policy accommodation would be warranted in the near term should these recent developments prove to be sustained and continue to weigh on the economic outlook,’ added the FOMC minutes.

Powell testifies that more FOMC members wanted rate cut

While testifying before Congress, Fed chair, Jerome Powell, also noted that many FOMC officials wanted to reduce interest rates.

‘Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened. Since then, based on incoming data and other developments, it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the US economic outlook,’ said Powell.

FOMC members vote against rate cut because of strong US economy

While several FOMC members made a case for a rate cut, the June meeting minutes show that many Fed officials want US economic conditions to worsen before taking action.

‘Some participants suggested that although they now judged that the appropriate path of the federal funds rate would follow a flatter trajectory than they had previously assumed, there was not yet a strong case for a rate cut,’ said the minutes.

What do economic experts say about a possible interest rate cut?

Peter Boockvar, chief investment officer at Bleakley Advisory Group, says the June FOMC minutes and Powell’s testimony indicate a rate cut is imminent.

Powell ‘fully endorsed the July rate cut and did absolutely nothing to pull the markets back from that expectation,’ said Boockvar.

David Carter, chief investment officer at Lenox Wealth Advisors, says the strong US economy doesn’t give the Fed an urgent reason to cut rates. However, he also believes that the Fed will lower interest rates in July.

‘The Fed’s in a tough spot, the economy seems to be chugging along, but the pressure is building to drop rates. There continues to be uncertainty around economic growth outside the US and trade concerns linger. We [Lenox Wealth Advisors] believe a cut is coming this month,’ said Carter.

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Keep an eye on FOMC opportunity

Find out how FOMC meetings can affect the markets ahead of the next one on 15-16 September 2020.

  • How might the next Fed meeting impact your trading?
  • What was decided at the last Fed meeting?
  • How does the FOMC announcement usually affect the dollar?

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