• “Participants continued to view sustained expansion of economic activity, with strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes.”
  • "Members observed that a patient approach to determining future adjustments to the target range for the federal funds would likely remain appropriate for some time."
  • “Participants observed that inflation pressures remained muted …At least part of the recent softness in inflation could be attributed to idiosyncratic factors that seemed likely to have only transitory effects on inflation…”
  • “Many participants suggested that their own concerns from earlier in the year about downside risks from slowing global economic growth and the deterioration in financial conditions or similar concerns expressed by their business contacts had abated to some extent.”
  • The meeting took place before the breakdown on US/China trade talks

The Federal Reserve governors reaffirmed their “patient” rate policy in their meeting earlier this month noting that the hold would remain “for some time.”


The edited minutes of the April 30th-May 1st FOMC meeting observed that economic growth in the first quarter was stronger than anticipated but that it would probably slow as the year progressed. 

Weak inflation was laid to several transitory and “idiosyncratic factors”, specifically  sharp declines in clothing costs and portfolio management services.


Concerns about a global economic slowdown had “abated” somewhat for many members. In prior meetings the governors had marked the Brexit negotiations and the US/China trade dispute as sources of potential problems.

The FOMC meeting took place a few days before the escalation of the trade argument between the United States and China which resulted in competing tariffs and a breakdown in negotiations.  

The White House has accused China of reneging on previous commitments for the enforcement of the deal. President Trump raised tariffs from 10% to 25% on certain Chinese goods on May 10th and Beijing retaliated with its own duties three days later.  There are currently no scheduled talks though both sides say they are willing to negotiate.

Last December the Fed was projecting two 0.25% increases for 2019 and a 2.9% Fed Funds rate at the end of the year. In the January statement the Fed adopted its “patient” policy for rate adjustment and in the March Projection Materials increases for 2019 had dropped to one and a 2.6% rate.

Markets have a different opinion. The Fed Funds futures are pricing in at least one 0.25% rate cut by the end of the year convinced that the trade war with China, a global economic slowdown and perhaps presidential pressure will force the Fed to reduce rates by the end of the year.

The futures show the odds of at least a 25 basis point reduction rising steadily at each subsequent FOMC meeting.

Before the release of the minutes next month’s odds for a cut were 6.6%.  By the July 31st meeting the odds were 16.7%, by September 18th 39.5%, October 30th 49.8% and last meeting of the year December 11th the chance of a cut was 69%. 

CME Group

After the release of the minutes the odds for a June cut dropped to 5%, all  the out months rose slightly, by July 16.8%, by September 39.8%, October 50.7% and December 69.6%. 

CME Group

Focus will now switch to the June18th-19th FOMC meeting and the second set of economic and rate projections for 2019.  

Will the Fed adopt the market view for a rate cut before the end of the year?


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