Fed officials saw rate cut as 'mid-cycle adjustment,' minutes reveal

Federal Reserve officials who voted to lower interest rates at the end of July saw their decision as part of a policy recalibration in the face of a darkening economic outlook.

Minutes from the July 30-31 Federal Open Market Committee meeting published Wednesday revealed that most policymakers believed the decision to cut the benchmark federal funds — for the first time since the financial crisis 11 years ago — was part of a mid-cycle adjustment, not the beginning of a series of deeper rate cuts.

"In their discussion of the outlook for monetary policy beyond this meeting, participants generally favored an approach in which policy would be guided by incoming information and its implications for the economic outlook and that avoided any appearance of following a preset course," the minutes said.

Last month, the U.S. central bank lowered rates by 25 basis points to a range between 2 percent and 2.25 percent, but left the door open for a second cut later this year. Currently, traders are pricing in a 100 percent chance of a rate cut during the Fed's upcoming September meeting.

Fed Chairman Jerome Powell is expected to pave the way for a second rate cut during his speech at the Jackson Hole Economic Symposium in Wisconsin on Friday on the heels of the yield curve's inversion last week.

But members did not commit to additional cuts during the meeting, instead choosing to wait and see how certain economic uncertainties, like slowing global growth and the U.S.-China trade war, play out. However, policymakers warned that the trade war appears to be a "persistent headwind."

"A number of participants suggested that the nature of many of the risks they judged to be weighing on the economy, and the absence of clarity regarding when those risks might be resolved, highlighted the need for policymakers to remain flexible and focused on the implications of incoming data for the outlook," the minutes said.