Fed cites volatility, uncertainty as reasons to go slow on rate cuts
Federal Reserve officials appeared divided at their meeting earlier this month over how much farther they may need to cut interest rates, but as a group agreed to avoid giving much guidance from here on about how U.S. monetary policy is likely to evolve.
There was uncertainty about the direction of the economy, Fed officials noted, according to the minutes of the Nov. 6-7 meeting, uncertainty about just how much the current level of interest rates was doing to restrict the economy — a key issue in deciding how much further rates should fall — and a developing case to step carefully.
«Many participants observed that uncertainties concerning the level of the neutral rate of interest complicated the assessment of the degree of restrictiveness of monetary policy and, in their view, made it appropriate to reduce policy restraint gradually,» said the minutes, which were released on Tuesday. The neutral interest rate is the level at which economic activity is neither stimulated nor restrained. «Participants noted that monetary policy decisions were not on a pre-set course and were conditional on the evolution of the economy and the implications for the economic outlook… They stressed that it would be important for the (Federal Open Market) Committee to make this clear as it adjusted its policy stance,» the minutes stated, referring to the central bank's policy-setting committee. The Fed cut its benchmark policy rate by a quarter of a percentage point to the 4.50%-4.75% range at the meeting three weeks ago, a session that
