Fed Regarded Its Last Rate Cut as Sufficient

Federal Reserve policymakers voted 10 to 1 in mid-November to reduce the overnight bank lending rate by a quarter point, and then decided to take a wait-and-see approach to further rate cuts, minutes of the meeting, released Wednesday, show.

Fed Bank of Cleveland President Jerry Jordan dissented because he viewed the central bank’s two previous rate cuts as “sufficient responses to the stresses in financial markets” that had emerged in late summer and early fall, according to the minutes.

Jordan’s dissent at the Nov. 17 meeting was his fifth this year--threatening to make him the Fed’s “Dr. No” on the question of easing credit.

The minutes were released one day after the Fed’s Open Market Committee, its policymaking body, held its last meeting of the year, at which it made no change in the benchmark U.S. bank interest rate, now 4.75%.

At the Nov. 17 meeting, officials decided that “a further easing move would complete the policy adjustment to the changed economic and financial climate that had emerged since midsummer and would provide some insurance against any unexpectedly severe weakening of the [economic] expansion,” according to the minutes.

The Fed also returned to a “neutral bias” at the meeting, a sign that central bankers weren’t leaning toward raising or cutting interest rates in the future. Hence, the lack of action at this week’s meeting.

“The minutes underscore the FOMC’s intention that the November ease should be the last for a while,” said Christopher Low, chief economist at First Tennessee Capital Markets in New York.

Moreover, the FOMC also agreed that its Nov. 17 rate cut “could readily be reversed if unexpected circumstances should call for such an action,” according to the minutes.