Fed cuts interest rates amid internal dissent

"Three officials dissented from the decision, the most at a policy meeting since 2019. Chicago Fed president Austan Goolsbee and Kansas City Fed President Jeff Schmid favored leaving rates steady, while governor Stephen Miran preferred to cut rates even more aggressively. Notably, new projections showed six out of 19 top Fed officials believed it would be more appropriate to leave rates steady this meeting rather than cut."

"Of note: The FOMC also said it will begin purchasing short-term Treasury securities "as needed" to maintain an ample supply of reserves in the financial system, a step meant to avoid the kinds of year-end flare-up in money markets that occurred in the fall of 2019. That implies that, just weeks after the Fed stopped shrinking its balance sheet under its quantitative tightening program, it could again increase it."

"Between the lines: The divides within the Fed have flared publicly since the last policy meeting at the end of October. One faction, led by three Trump-appointed governors, argues that there are signs of incipient weakness in the job market that the Fed should address, and that elevated inflation due to tariffs will prove temporary. Another faction, which includes many presidents of reserve banks around the country, see inflation persistently above the Fed's 2% target with little sign it will fall quickly."

The Federal Open Market Committee lowered its target for the federal funds rate to between 3.5% and 3.75%. Three officials dissented: Chicago Fed president Austan Goolsbee and Kansas City Fed President Jeff Schmid favored leaving rates steady, while governor Stephen Miran preferred larger cuts. New projections showed six of 19 officials thought leaving rates steady would have been more appropriate, and several 'shadow dissents' likely included nonvoting officials with reservations. The FOMC said it will begin purchasing short-term Treasury securities 'as needed' to maintain ample reserves, implying a possible increase in its balance sheet. The New York Fed anticipates buying $40 billion in Treasury bills starting Friday. Divisions persist over inflation risks and labor market strength.

Read at Axios