Minutes from FOMC meeting held on July 30-31 reveal that a “vast majority” of participants believe it would likely be appropriate to ease monetary policy “at the next meeting” if incoming data aligns with expectations. This signals a strong possibility of a rate cut in September.
The minutes highlighted that economic activity had shown solid growth, inflation had made some further progress toward the target, and labor market conditions had eased. However, the Committee emphasized the importance of maintaining a “data-dependent” approach. Decisions, they noted, are based on the “evolution of the economy” rather than following a “preset path,” and depend on the “totality of the incoming data” rather than any single data point.
In terms of risk management, the majority of participants acknowledged that risks to the employment goal had increased, while many noted that risks to the inflation goal had decreased. Some expressed concern that gradual easing in labor market conditions could lead to a “more serious deterioration.”
On the other hand, several participants cautioned against reducing policy restraint too quickly or excessively, warning that it could lead to resurgence in aggregate demand and potentially undo progress on inflation. They pointed to risks such as economic shocks that could drive inflation higher or the possibility that inflation could be more persistent than currently anticipated.
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