Minutes of the Federal Open Market Committee.September 17–18, 2024

Developments in Financial Markets and Open Market Operations - Nominal Treasury yields declined notably due to weaker-than-expected data releases and policy communications suggesting a reduction in policy restraint [1] - Broad equity prices finished modestly higher, while credit spreads remained narrow by historical standards, indicating compatibility with continued economic expansion [1] - A brief episode of elevated market volatility occurred in early August, driven by unwinding of speculative trading positions due to unrelated events [2] Policy Expectations - The market-implied policy rate path shifted down materially, with expectations of about 100 basis points of cuts through year-end, compared to around 50 basis points previously [3][5] - Most survey respondents expected a 25 basis point cut at the meeting, but the probability of a 50 basis point cut had increased [5] - Balance sheet expectations remained largely unchanged, with most respondents not concerned about an economic downturn in the near or medium term [5] International Developments - Many central banks in advanced foreign economies began or continued to lower policy rates, contributing to a modest decline in the trade-weighted U.S. dollar index [6] Economic Situation - Real GDP expanded solidly, with job gains moderating and the unemployment rate remaining low at 4.2 percent [11][13] - Consumer price inflation was 2.5 percent in July, with core PCE inflation at 2.6 percent, both measures well below their rates from a year ago [12] - Labor market conditions eased further, with average monthly nonfarm payroll gains lower than in the second quarter [13] Financial Situation - The market-implied path for the federal funds rate declined notably, with nominal Treasury yields decreasing significantly [18] - Broad stock price indexes increased despite a temporary drop in early August, and yield spreads on corporate bonds remained in the bottom quintile of historical distributions [19] - Credit remained accessible for most consumers, though credit growth showed signs of moderating [24][25] Staff Economic Outlook - The staff forecasted solid economic growth, with real GDP growth expected to rise in line with potential output growth from 2025 to 2027 [28] - Inflation forecasts were slightly lower, with total and core PCE price inflation expected to decline further, reaching 2 percent by 2026 [29] Participants' Views on Current Conditions - Participants noted that inflation remained somewhat elevated but expressed greater confidence that it was moving sustainably toward 2 percent [34][35] - Labor market conditions were observed to be less tight than before the pandemic, with a slowdown in payroll employment growth [36] - Economic activity continued to expand at a solid pace, with resilient consumption spending supported by rising real household incomes [38]