FOMC Minutes: Many said uncertainty over neutral rate made it appropriate to move slowly

Highlights from the Nov 6-7 FOMC decision:

🔹 ON FUTURE POLICY PATH:
“Participants anticipated that if the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment, it would likely be appropriate to move gradually toward a more neutral stance of policy over time.”

🔹 ON ECONOMY:
“Recent indicators suggested that economic activity had continued to expand at a solid pace, labor market conditions had generally eased since earlier in the year, and the unemployment rate had moved up but remained low.”

🔹 ON INFLATION:
“Almost all participants judged that, though month-to-month movements would remain volatile, incoming data generally remained consistent with inflation returning sustainably to 2 percent.”

🔹 ON RISKS:
“Almost all participants agreed that risks to achieving the Committee’s employment and inflation goals were roughly in balance.”

🔹 ON DECEMBER MEETING EXPECTATIONS:
“A large majority of respondents had a modal expectation of a 25 basis point cut at this meeting and another 25 basis point cut at the December meeting.”

🔹 ON GRADUAL APPROACH:
“Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually.”

🔹 ON FINANCIAL CONDITIONS:
“Despite higher yields, and amid greater confidence about the growth outlook and somewhat better-than-expected corporate earnings reports, broad equity price indexes increased notably.”

🔹 PAUSE?:
“Some participants noted that the Committee could pause its easing of the
policy rate and hold it at a restrictive level if inflation remained
elevated”

There is a consistent message here around moving gradually, with only ‘some’ even talking about a pause. The market is pricing in a 57% chance of a cut on Dec 18.

This article was written by Adam Button at www.forexlive.com.