At the September central bank meeting, a “substantial majority” of Federal Reserve officials supported starting an era of monetary easing with a deep half-point rate cut.
But just-released minutes of the two-day meeting suggest there was broader agreement that the initial action did not commit the Fed to a specific pace of future interest rate cuts.
The minutes of the September 17-18 meeting state that supporters of the half-point cut were of the view that “such a readjustment of monetary policy stance would begin to better align with recent inflation and labor market indicators. It is stated that At this point, the Fed lowered its benchmark policy interest rate from the 5.25% to 5.50% range it had maintained since July 2023 to the 4.75% to 5% range.
Other officials said there was a “plausible case” for a rate cut at the July meeting, but that statistics since then only supported the case for easing policy.
However, “some” participants supported only a quarter-point reduction, while “several others said they could have supported such a decision.”
Minutes of the meeting showed that when policymakers approved a rate cut of the size normally reserved when the central bank is concerned that the economy is slowing rapidly and needs support through easing financial conditions, the Fed Further details revealed that there was a wide range of opinions within the group.
In this case, Fed policymakers are focusing on the fact that inflation has fallen sharply from the high levels seen in 2022 and 2023, and by some measures is close to the Fed's 2% target. In light of this, the initial rate cut is called a “recalibration” of monetary policy. The goal needs to be achieved even though the economy remains relatively strong.
The minutes said it was “important to convey that the move was not interpreted as evidence of a worsening economic outlook.”
Still, concerns about the labor market are growing among Fed policymakers, with officials pointing to a recent rise in the unemployment rate and weak employment and inflation data in July and August.
Fed officials said at the meeting that interest rate cuts could continue as long as inflation continues to decline, although the pace and target were still up for debate.
The minutes said future data would determine how policy develops, but noted that if the economy continues as expected, “it would be appropriate to shift to a more neutral policy stance over time.” did.
The half-point rate cut was opposed by Michelle Bowman, the first Fed director since 2005, who said a quarter-point rate cut was a better way to begin easing policy. I was thinking.
But in new economic forecasts released after the September meeting, all but two policymakers specified that the Fed would cut interest rates by at least 75 basis points this year, ranging from a 50 basis point rate cut. It wasn't something that was confirmed the first time.
While the difference to the economy from starting with this rate cut and cutting rates by 25 basis points is considered insignificant by many policymakers, Fed Chair Jerome Powell said in a post-meeting press conference that He pointed to a larger interest rate cut in response to weak employment data in July. A meeting in which the Fed announced its commitment to begin policy easing “strongly” and maintain a healthy job market.
Recent employment data showed a rebound in job growth and a decline in the unemployment rate.
Revisions to the previous month's data also pushed payroll growth in July from 89,000 to 144,000, prompting some Fed officials to lower interest rates that month if known at the time. That erased particularly weak readings that some Fed officials had said may have been weak.
