Concerns about a slowdown in global growth and trade uncertainties remained prominent factors in the Federal Open Market Committee’s decision to cut interest rates by 25 basis points at the last FOMC meeting, according to minutes released yesterday. A few participants noted that it was a “close call” to vote for a rate cut as opposed to holding rates steady.
“Many participants judged that an additional modest easing at this meeting was appropriate in light of persistent weakness in global growth and elevated uncertainty regarding trade developments,” the minutes noted. Members also noted that “a modest easing of policy at this meeting would likely better align the target range for the federal funds rate with a variety of indicators used to assess the appropriate policy stance, including estimates of the neutral interest rate and the slope of the yield curve.”
In light of recent liquidity challenges in the repo market, FOMC members also discussed options for ensuring stability, including a “standing repo facility.” This approach would allow the Fed to step in and offer reserves on demand in exchange for ultra-safe collateral like Treasury debt.