itstargetnews
Minutes of the meeting released on Wednesday showed that Fed officials were strongly inclined to cut interest rates in September, and the only dispute seemed to be the extent of the cut.
this Meeting amounty showed that FOMC participants were nearly unanimous in saying the central bank should cut its key overnight borrowing rate due to labor market weakness.
However, they are divided over whether there should be two or three overall cuts this year, including the quarter-percentage point cut approved at the Sept. 16-17 meeting.
The minutes of the meeting stated, “In considering the outlook for monetary policy, nearly all participants noted that with the reduction in the target range for the federal funds rate at this meeting, the Committee is fully capable of responding to potential economic developments in a timely manner.”
“Participants expressed a range of views on the extent to which the current stance of monetary policy is restrictive and the likely future policy path,” the document added. “Most agreed that further easing of policy may be appropriate over the remainder of the year.”
One vote difference
Forecast material released at the meeting reflected disagreements among the 19 officials who attended the FOMC meeting, with 12 of them voting.
Although the full FOMC voted 11-1 to cut the benchmark interest rate by 0.25 percentage point, participants had different views on how aggressive steps should be taken during the remainder of 2025 and in the coming years. This rate cut brings the federal funds rate to the target range of 4%-4.25%.
Ultimately, a slim 10-9 majority favored a quarter-percentage point cut in the remaining two meetings of the year. Forecast materials indicate that another rate cut is likely in 2026 and 2027 before the funds rate stabilizes at around 3% over the long term.
However, the meeting raised a number of points. The Sept. 16-17 meeting was the first for newly appointed Gov. Stephen Miran, who took office just hours before the session began.
Millan pointed out that he was the only voter who supported more aggressive easing policies. Although the minutes of the meeting did not reveal specific participants, a statement after the meeting noted that Milan voted against, preferring a half-percentage point cut.
Furthermore, in subsequent public appearances, Millan noted that he was a lone “spot,” suggesting that he had adopted a more aggressive easing policy than other members of the committee.
Labor market concerns
The meeting seemed to see a mix of views, with some favoring a more cautious approach to cuts.
“Some participants pointed out that financial conditions, judging from a number of indicators, suggested that monetary policy may not be particularly stringent, and they believed that a cautious approach was needed when considering future policy changes,” the minutes of the meeting said.
Officials are increasingly concerned about the state of the labor market, which they believe is weakening as the threat of upward inflation persists, although they still expect the labor market to fall back toward the Fed’s 2% target.
“Attendees generally noted that their judgment of appropriate policy for this meeting
The action reflected a shift in the balance of risks, the minutes said. “In particular, most participants believed that it would be appropriate to shift the target range for the federal funds rate toward a more neutral setting because they believed that downside risks to employment had increased during the meeting, while upside risks to inflation had either decreased or not increased.”
Tariffs were a big part of the discussion, and President Trump was widely seen as Donald TrumpAfter pushing up prices this year, taxes will not be a major source of lasting inflation.
The committee’s views on interest rates are consistent with the findings of a survey sent by the Fed to primary dealers in financial markets, the summary said.
“Almost all respondents surveyed by Desk expect a 25 basis point cut in the federal funds rate target range at this meeting, and about half expect further cuts at the October meeting,” the meeting minutes said. “The vast majority of respondents expect at least two 25 basis point rate cuts by the end of the year, and about half expect three rate cuts during this period.”
One basis point is equal to 0.01%, so a change of 25 basis points is equivalent to a quarter of a percentage point.
In addition to the unusual dissent, policymakers now face the fallout from a government shutdown. Data providers such as the Labor Department and the Commerce Department have shut down operations while the standoff continues and are not releasing or collecting data.
If the Federal Open Market Committee (FOMC) fails to end the shutdown at its Oct. 28-29 meeting, policymakers will largely turn a blind eye to key economic indicators such as inflation, unemployment and consumer spending. Markets are pricing in the Fed being almost certain to cut interest rates at both its upcoming meeting and its December meeting, but that decision could be affected by a lack of data.
Correction: An earlier version incorrectly attributed the view of market surveys to the views of Fed officials. A survey of market participants showed that “about half” expected a total of three cuts this year.
