"The Fed Was Deeply Divided Over the Path of Interest Rates," FOMC Minutes Show

[Financial News]  

It was confirmed on the 8th, local time, that policymakers at the Federal Reserve were sharply divided over the path of interest rates at last month’s Federal Open Market Committee (FOMC) meeting.
According to the minutes of the FOMC meeting held on the 16th and 17th of last month, which the Federal Reserve released on the day, participants split into two camps at the first meeting chaired by Kevin Warsh. One side argued that rates should be cut because inflation could ease, while the other said rates should be raised because price pressures were still persistent.
According to CNBC, Warsh described the debate at the post-FOMC press conference as a "family fight." At the time, the Federal Reserve unanimously held the benchmark rate steady at 3.5% to 3.75%.
The minutes, however, showed that the decision to hold rates was not a smooth one.
They suggested that the hold decision came after the rate-cut and rate-hike scenarios were closely matched.
In the "dot plot," which did not include Warsh, committee members narrowly projected one rate hike this year, followed by one rate cut each year over the next two years.
According to the minutes, when asked about the most likely scenario, "many" participants said the appropriate benchmark rate at the end of the year would be at the current level or slightly lower. The Fed’s use of "many" is understood to mean just over half.
The minutes added that "many other participants judged that the appropriate level of the policy rate at year-end would be higher than it is now."
They also explained that "participants noted that future policy decisions would depend on information and data to be released going forward."
Meanwhile, the minutes were only 14 pages long, shorter than usual, reflecting Warsh’s desire to keep comments on the future rate outlook to a minimum. The official statement issued after last month’s FOMC meeting was also about one-third the usual length.
According to the minutes, a "majority" of committee members supported the shorter statement.
The statement also dropped a previous line indicating a preference for monetary easing. The minutes said most members wanted that wording removed.

[email protected] Song Kyung-jae Reporter