Fed was divided about interest rate cut

WASHINGTON >> Federal Reserve officials were sharply divided when they voted to cut interest rates for the first time in a decade in late July, newly released minutes from their meeting last month show.

Officials lowered borrowing costs by a quarter of a percentage point at the meeting, citing slowing global growth, uncertainties from President Donald Trump’s trade war and stubbornly low inflation.

Notes from the gathering, released Wednesday, show that “a couple” of participants at the meeting — not all of whom get to vote on monetary policy — would have preferred a larger halfpoint cut in the federal funds rate to shore up inflation.

But “several” wanted to hold rates steady, noting a strong job market and low unemployment. Two Fed officials voted against the decision to cut.

The division highlights the challenge of setting monetary policy when Trump’s trade policy is clouding the outlook for an otherwise decent-looking economy. Because it is unclear how much trade tensions will slow growth and whether they will eventually ease, Fed policy must aim at a moving target as it tries to keep the economy expanding steadily.

The president’s next round of tariffs on Chinese goods is expected to take effect Sept. 1, and Trump has shown no sign of backing down, even as global growth shows cracks and after a powerful recession signal flashed in bond markets.

While consumer spending and overall economic growth are holding up in the United States, household confidence declined in preliminary August data as Americans became less positive about the economic outlook. Some businesses are holding off on investment as Trump’s trade war fuels uncertainty.