Federal Reserve officials were split about whether to lower interest rates during their two-day meeting in the middle of June, with some members pushing for easier monetary policy.
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Although the U.S. central bank most recently voted to keep the benchmark federal funds rate steady (with one member dissenting), minutes from the June 18-June 19 Federal Open Market Committee meeting published Wednesday revealed that some policymakers believed the need for a rate cut was imminent.
"Several participants noted that a near-term cut in the target range for the federal funds rate could help cushion the effects of possible future adverse shocks to the economy and, hence, was appropriate policy from a risk-management perspective," the minutes said.
However, some members believed that with the economy still in a favorable position, cutting rates to increase inflation risked overheating labor markets.
A few participants expressed the view that with the economy still in a favorable position in terms of the dual mandate, an easing of policy in an attempt to increase inflation a few tenths of a percentage point risked overheating the labor markets and fueling financial imbalance.
But most policymakers agreed there was a "significant increase in risks and uncertainties" surrounding the economic outlook, with signs of weakness in U.S. business spending, weaker-than-expected foreign economic data and rising concerns about slowing global growth.
"They generally agreed that risks and uncertainties surrounding the economic outlook had intensified and many judged that additional policy accommodation would be warranted if they continued to weigh on the economic outlook," the minutes said.
Wall Street continues to price in a 100 percent chance of a reduction in the benchmark federal funds rate at the Fed's upcoming July 31st meeting.
Fed Chair Jerome Powell seemingly set the table for a rate cut at the end of the month during testimony before the House Financial Services Committee on Wednesday.
He noted that while the economy has performed "reasonably well" during the first half of 2019, inflation remains well below the Fed's 2 percent target. The interbank lending rate is currently between 2.25 percent and 2.50 percent -- the highest in decades, but low by historical standards.
"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 U.S. economic outlook. Inflation pressures remain muted," he said in prepared remarks for the House Financial Services Committee.