Cyrillic Partners

The FOMC released the minutes from its last meeting Tuesday, showing a closely divided board when it came to cutting rates. It also downgraded its optimism on economic growth.

From Bloomberg: “Most members saw substantial downside risks to the economic outlook and judged that a rate reduction at this meeting would provide valuable additional insurance against an unexpectedly severe weakening in economic activity,” according to minutes of the Federal Open Market Committee’s Oct. 30-31 meeting. “Many members noted that this policy decision was a close call.”

The prediction for slower growth shouldn’t be that much of a surprise, not after Bernanke’s address to Congress earlier this month (read our story). Still, the extent to which the Fed anticipates a slow-down shocked some.

From CNNMoney.com: The Fed indicated in an addendum to its minutes that it now expects the economy to grow at about a 1.8 percent to 2.5 percent rate next year, down from a forecast in June of 2.5 percent to 2.75 percent growth. “I am surprised that their forecast for next year is as low as it is,” said David Resler, chief economist of Nomura Securities International Inc. “The forecast is considerably weaker than it had been and that is the most significant development in this report.”

So what’s the takeaway? Expect cuts when the FOMC meets in December. The Fed Funds Futures quoted on the CBOT indicate a 90% chance of another quarter cut in December and 67% odds that the Fed will do the same again in January.

Seems like the markets are betting against Kroszner and his sanguine predictions (which we covered here).

Read our coverage of the last rate cut here.

[Picture thanks to TheFreshTrader.com]

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