Fed’s Monetary Policy Seen as ‘Well Calibrated’ After Last Rate Cut to Support Growth, Inflation Goals

Federal Reserve officials said monetary policy would be “well calibrated” to support goals of economic growth and inflation near the 2% target after the latest interest-rate cut, minutes from last month’s meeting showed.

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The Federal Open Market Committee, which opted to cut rates by 25 basis points in an 8-2 vote, had some members say risks had waned and there wasn’t many indications that weaker business sentiment had spilled into labor and consumer spending.

“A few participants raised the concern that a further easing of monetary policy at this meeting could encourage excessive risk-raking and exacerbate imbalances in the financial sector,” the minutes showed.

The FOMC has cut rates three times this year in a bid to shore up economic growth amid downbeat sentiment that’s weighing on growth projections. While Fed members will see elevated challenges to growth, “some risks were seen to have eased a bit, although they remained elevated,” according to the minutes.

Looking beyond last month’s move, most Fed members “judged that the stance of policy, after a 25 basis point reduction at this meeting, would be well calibrated to support the outlook of moderate growth, a strong labor market, and inflation near the committee’s symmetric 2% objective,” the minutes read. That “likely would remain so as long as incoming information about the economy did not result in a material reassessment of the economic outlook.”

Still, the FOMC reiterated that monetary policy isn’t on a “preset course” and they would monitor the effects of the rate cuts, as well as other data that impacts the economic outlook in deciding about the path of future moves.

A few policymakers wanted the statement that was issued at the end of the October meeting to indicate that another rate cut was unlikely unless data showed a “significant slowdown” in the economy, the minutes showed.

But the committee “agreed to remove the ‘act as appropriate’ language and emphasize that the committee would continue to monitor the implications of incoming information for the economic outlook as it assessed the appropriate path of the target range for the federal funds rate,” according to the minutes.

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