Fed faces crucial test

The Fed is divided

Will the US Federal Reserve cut interest rates further? Following the steps taken in September and October, the next course of action is unclear. At the press conference after the October meeting, Fed Chair Powell explained that there were “strongly different views about how to proceed in December” within the Federal Open Market Committee. A further cut at the December meeting is by no means a foregone conclusion – “far from it,” according to Powell.

The minutes of the meeting, which have since been published, confirmed this assessment. This is because “several” participants were of the opinion that a further interest rate cut in December could well be appropriate. “Many” participants, on the other hand, expressed the view that it would probably be appropriate to leave interest rates unchanged for the rest of the year. Since in Fed speak ‘many’ is more than 'several', those who tended to favor unchanged interest rates in December predominated among the meeting participants. This is an interesting point, even if not all meeting participants are entitled to vote.

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