Federal Reserve officials Tuesday said the U.S. economic outlook is unclear, but credit market strains that led the central bank to cut interest rates sharply last month are easing, suggesting a follow-up rate cut is not a done deal.
"These are uncertain times," San Francisco Federal Reserve Bank President Janet Yellen said on Tuesday. "Any forecast and any analysis of events should be made with a great deal of humility about its correctness. And that's why I am keeping an open mind about prospects for the future," she said in a speech to a Town Hall-Los Angeles public affairs forum.
Yellen is not currently a voter on the Fed's policy-setting Federal Open Market Committee.
Stronger-than-expected employment data in September and large upward revisions to payrolls August and July signal that the outlook for the economy is not darkening as some have feared, St. Louis Fed President William Poole said in a separate speech.
"Financial markets appear to be stabilizing, but they have not returned to normal and are still fragile," Poole, a voting member on the FOMC, told the Industrial Asset Management Council.
The Fed officials' comments come as minutes of the U.S. central bank's Sept. 18 meeting released Tuesday showed policy-makers mainly focused on counteracting turmoil in credit markets as grounds for a hefty half-percentage point cut in benchmark overnight borrowing costs to 4.75 percent.
"Members judged that a lowering of the target funds rate was appropriate to help offset the effects of tighter financial conditions on the economic outlook," the Fed minutes said.
"In order to help forestall some of the adverse effects on the economy that might otherwise arise, all members agreed that a rate cut of 50 basis points at this meeting was the most prudent course of action," the Fed said.
Policy-makers felt they could trim borrowing costs without fanning inflation because price pressures appeared to clearly be moderating, the minutes showed.