The fallout from the U.S.-China trade war was the overriding concern of Federal Reserve policymakers at the September meeting, according to minutes released Wednesday.
FOMC voting members “remained attentive to a range of global risk factors that could affect the policy rate path, including trade tensions between the United States and China,” the minutes said, one of 28 times trade was cited in the 17-page document. No other issue was mentioned as much.
The policymakers blamed the trade war for the abysmal performance of the manufacturing sector. Earlier this month, the Institute for Supply Management said its manufacturing index fell to a 10-year low in September.
On Thursday, the Wall Street Journal said two-thirds of economic forecasters believe the U.S. is in the middle of a manufacturing recession.
“A persistent drag from trade tariffs pointed toward continued softness in factory output in coming months,” the FOMC minutes said.
Besides trade, the FOMC members were worried many investors seemed to expect more rate cuts than they intended to deliver.
“Several participants suggested that the committee’s post-meeting statement should provide more clarity about when the recalibration of the level of the policy rate in response to trade uncertainty would likely come to an end,” the minutes said.
Several FOMC members said prices in futures markets “were currently suggesting greater provision of accommodation at coming meetings than they saw as appropriate,” according to the minutes.
The FOMC approved a quarter-point rate cut at the September meeting, putting the overnight funds rate in a target range of 1.75% to 2%. That matched the rate cut in its July meeting that was the first since the financial crisis more than a decade earlier.