Washington (AFP)
The US Central Bank has estimated that weak global growth and trade tensions may slow down the US economy, but the Fed should keep its "open options" on rate developments.
The Fed had cut rates by a quarter of a percentage point (0.25%) for the first time since 2008 at its last monetary meeting on July 31, saying according to the minutes of this meeting released Wednesday, take a "insurance" about the future in the face of uncertainties about trade and the global economy.
In the minutes of this meeting, the Fed, which will meet again on September 18 to determine monetary policy, says it wants to keep "open options" on the evolution of interest rates and not to think that these they are "on a track all traced".
"It is important to maintain a range of options in setting the level of federal funds rates," notes the report.
Especially since "the nature of the risks (...) and the lack of clarity on their resolution reinforce the need (for the Fed) to remain flexible and focused on economic information," says the report.
Day-to-day rates are between 2% and 2.25%, which remains historically low.
A large majority of analysts expect another rate cut at the next FOMC meeting on September 18th.
During the previous meeting, two members of the Fed had voted against the decision to lower rates (Esther George of the Kansas City Fed and Eric Rosengren of Boston).
They would have preferred to maintain the rates in the state, citing the risks to financial stability by encouraging the race to yield.
But the minutes show that, by contrast, two participants were ready in July to cut rates by half a percentage point (0.50%), more than the decision.
They favored "a stronger gesture to better address persistently low inflation in recent years".
President Donald Trump is constantly putting pressure on the central bank to lower the cost of credit by an entire percentage point. Again Wednesday he was impatient against the Fed who should according to him "wake up" and against his boss Jerome Powell who "lack of fingering".
Trump does not hide his willingness to lower the dollar, in the wake of a rate cut, to better cope with commercial competition in full tariff war.
The fall in Fed rates last July, the first in eleven years, is explained by participants in the Monetary Committee as "a recalibration, a mid-cycle adjustment".
© 2019 AFP