Federal Reserve officials expressed concerns that the odds of a recession have “increased notably” due to a slowdown in global growth and the fallout from rising trade and geopolitical tensions, according to minutes from the bank’s September meeting released Wednesday.
Members of the Fed’s policy-setting Federal Open Markets Committee (FOMC) said that while the U.S. economy on the whole remained solid, the risks of a downturn had risen steadily since the panel’s meeting in July, according to the minutes from their Sept. 17-18 meeting.
{mosads} The FOMC voted 7-3 on Sept. 18 to cut interest rates by 0.25 percentage points, a move Fed Chairman Jerome Powell described as “a step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.”
Minutes from the preceding FOMC meeting detailed the extent of the Fed’s growing concern about a stable but slowing U.S. economy.
“Participants generally viewed the baseline economic outlook as positive and indicated that their views of the most likely outcomes for economic activity and inflation had changed little since the July meeting,” the minutes read.
Even so, several officials noted that “statistical models designed to gauge the probability of recession” had “suggested that the likelihood of a recession occurring over the medium term had increased notably in recent months.”
While those officials said that unusually low differences between interest rates for long-term and short-term bonds could skew the recession signals, the central bank was largely united in concern about a potential hiring slowdown.
The U.S. economy has maintained unemployment near record lows and steady consumer spending despite growing economic and geopolitical turmoil abroad. But the fallout of President Trump’s trade battles and looming recessions in Europe have frozen U.S. business spending, weakened manufacturing output and hindered U.S. exports.
Fed officials noted that those factors “could give rise to slower hiring, a development that would likely weigh on consumption and the overall economic outlook.”
Trump has hammered the Fed, pushing Powell to more aggressively cut rates.