By Nick Timiraos 

WASHINGTON-Federal Reserve officials saw their move to cut interest rates last month as a "recalibration" rather than the start of a more aggressive easing cycle and were reluctant at their latest policy meeting to say how future moves would unfold.

The minutes of the July 30-31 meeting, released on Wednesday, also showed officials believed uncertainty surrounding the Trump administration's trade policy wasn't likely to let up anytime soon, creating a "persistent headwind" for the U.S. economic outlook.

As a result, officials didn't spell out in much detail how they might act to lower rates in the months ahead but stressed the need to be flexible. "Most participants viewed a proposed quarter-point policy easing at this meeting as part of a recalibration of the stance of policy, or mid-cycle adjustment, in response to the evolution of the economic outlook over recent months," the minutes said.

While officials left the door open to again lower rates, Fed Chairman Jerome Powell disappointed some investors at his postmeeting news conference when he didn't endorse market expectations of an aggressive series of rate cuts to follow.

Stock markets fell after the July 31 press conference but recovered the following morning. Markets tumbled again on Aug. 1 after President Trump's announcement that he would later this year impose 10% tariffs on $300 billion in Chinese goods that weren't already subject to tariffs.

That escalation set off a series of volatile market moves, particularly in bond markets. Yields on the 30-year Treasury bond fell briefly below 2% last week for the first time ever. The upshot is that Wednesday's minutes, which were released with a customary three-week delay, were somewhat dated by more recent market and trade policy developments.

How Fed officials judge the need for further stimulus in the face of trade policy uncertainty is a key focus for investors in the weeks leading up to the Sept. 17-18 meeting. Mr. Powell is set to speak on the challenges facing monetary policymakers at the Kansas City Fed's annual conference in Jackson Hole, Wyo., on Friday.

The minutes showed a divide in the committee over whether to cut rates last month. Several officials favored holding rates steady because they judged "that the real economy continued to be in a good place," the minutes said.

Two officials, on the other hand, favored a more aggressive half-point rate cut at the July meeting, which they said would better address "stubbornly low" inflation rates. While inflation held at the Fed's 2% target for much of last year after falling below the target for years, it has again drifted lower this year. Core prices, which exclude volatile food and energy categories, rose 1.6% from a year earlier in June.

The Fed has been under unusual and sustained public criticism from Mr. Trump, who called on Mr. Powell to cut rates more aggressively on Wednesday morning, for the third consecutive day.

"The only problem we have is Jay Powell and the Fed," Mr. Trump tweeted Wednesday morning. "He's like a golfer who can't putt, has no touch."

Fed officials don't discuss politics at their meetings, but the minutes show how officials have grown more concerned about businesses freezing planned investments due to the uncertainty caused by the president's trade policies.

While U.S. economic data since the Fed's mid-June meeting had been "largely positive," officials also discussed how "global economic growth had been disappointing" and "trade policy uncertainty, although waning some over the intermeeting period, remained elevated and looked likely to persist."

Many officials also said that greater flexibility was warranted because of the nature of the risks weighing on the economy "and the absence of clarity regarding when those risks might be resolved."

Trade-related developments in the run-up to the July meeting had been slightly positive relative to market expectations, with President Trump and Chinese President Xi Jinping agreeing to resume trade talks at the G-20 summit of world leaders in Japan in late June.

Still, officials "were mindful that trade tensions were far from settled and that trade uncertainties could intensify again," the minutes said. "Continued weakness in global economic growth remained a significant downside risk."

The minutes revealed a greater split over the inflation outlook. While some officials believed weaker growth abroad and trade tensions between the U.S. and other countries would push the Fed farther away from reaching its 2% target, many others weren't as concerned, the minutes said.

This larger group of officials believed that recent inflation data suggested that lower readings earlier this year were likely to prove transitory, which would remove one of several reasons that compelled last month's cut.

(END) Dow Jones Newswires

August 21, 2019 14:15 ET (18:15 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.