Fed minutes show "strongly differing views" ahead of December meeting

Federal Reserve officials were at loggerheads during the October Federal Open Market Committee meeting with "many" suggesting it will be wise to leave interest rates unchanged for the rest of the year, minutes on Wednesday showed.

While the FOMC approved a quarter point rate cut at the October meeting, the minutes showed several officials were against lowering the target range, while some supported the decision but could have also backed the status quo.

In addition, the minutes showed participants expressed "strongly differing views" about what policy decision would most likely be appropriate at the December meeting.

While most officials judged further rate cuts will likely be appropriate as the FOMC moves to a more neutral policy stance over time, several indicated that they "did not necessarily view another 25 basis point reduction as likely to be appropriate" in December.

Several participants assessed that a further reduction could be appropriate in December if the economy evolved as they expected.

But "many" participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for the rest of the year.

"All participants agreed that monetary policy was not on a preset course and would be informed by a wide range of incoming data, the evolving economic outlook, and the balance of risk," the statement added.

Officials continue to believe upside risks to inflation remain elevated and that downside risks to employment were elevated and had increased since the first half of the year.

The minutes reflect closely comments by Fed Chair Jerome Powell at the time of the October meeting, who pushed back against market expectations that a further reduction in December was a done deal, as priced in by markets at the time.

Powell said there were "strongly differing views" on the FOMC looking ahead to December, and that the decision was far from a foregone conclusion.

"For some part of the committee, it's time to maybe take a step back and see whether there really are downside risks to the labour market or see whether in fact that the stronger growth that we're seeing is real," Powell said, while others want to "push on".

Ahead of the release of the minutes, the CME's FedWatch tool places a 36% chance of another rate cut in December.