Federal Reserve officials were strongly inclined last month to cut interest rates at their September meeting, with some even ready to reduce borrowing costs immediately, according to the minutes of the July 30-31 meeting.
U.S. central bank officials left interest rates unchanged at the Federal Open Market Committee meeting last month but opened the door to a cut at the Sept. 17-18 session.
With inflation pressures abating, financial markets expect the Fed to cut its benchmark interest rate next month by a quarter of a percentage point from the current 5.25%-5.50% range, where it has been set for more than a year.
As much as a full percentage point worth of easing is expected by the end of this year.
At the July meeting, "the vast majority" of policymakers "observed that, if the data continued to come in about as expected, it would likely be appropriate to ease policy at the next meeting," said the minutes, which were released on Wednesday.
They also noted "many" Fed officials viewed the stance of rates to be restrictive and "a few participants" contended that amid an ongoing cooling in inflationary pressures, no change in rates would mean that monetary policy would increase the drag on economic activity.
The minutes said that while all Fed officials were on board with keeping rates steady in July, "several" policymakers said that progress on lowering inflation amid a rise in joblessness "had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision."
Driving the view of Fed rate cuts is the ebbing of price pressures back to the central bank's 2% target and increased anxiety about the state of the job market in the wake of recent data showing a rise in the unemployment rate.
The speed of the jump in the jobless rate, which bottomed at 3.4% early last year and has since climbed to 4.3% as of last month, has added urgency to the debate over rate cuts and has prompted some analysts to say that a half-percentage-point reduction in borrowing costs should be considered next month.
The Fed's concerns about the job market may be exacerbated by the Labor Department's estimate on Wednesday that 818,000 fewer payroll jobs existed in March than previously reported. The change was part of the annual benchmark revision process.
The minutes noted that a "majority" of Fed officials saw risks to the job market as having increased while risks to the inflation mandate had been reduced.
In his post-meeting press conference last month, Fed Chair Jerome Powell tipped off the likely outlook by saying "if we do get the data that we ... hope we get, then a reduction in our policy rate could be on the table at the September meeting."
The current level of joblessness is already higher than the 4% level Fed officials penciled in for this year in their updated economic projections in June, and the 4.2% policymakers projected for the end of next year.
But even as markets are prepping for a rate cut, some Fed officials have remained cautious about an easing, mindful of recent false dawns on the inflation front.
Fed Governor Michelle Bowman said on Tuesday that when it comes to September, "we should consider a range of possible scenarios that could unfold" on the monetary policy front, adding that there were "upside risks to inflation."
Markets are likely to get an update on Powell's views on Friday when he speaks at the Kansas City Fed's annual research conference in Jackson Hole, Wyoming. A number of other Fed officials are also likely to weigh in on the outlook while attending the conference.
