
‘Substantial Majority’ of Fed Members Supported Major Rate Cut in September: Fed Minutes
A significant majority of Federal Reserve policymakers supported the central bank’s substantial rate cut in September. However, some members expressed a preference for a smaller cut, citing concerns about the strength of the economy and labor market, as revealed in the minutes from the Federal Reserve’s meeting on September 17-18, released on Wednesday.
At the end of the previous meeting on September 18, the Federal Open Market Committee (FOMC) decided to lower its benchmark rate by 50 basis points, bringing it to a range of 4.75% to 5%. This marked the first rate cut since 2020.
The minutes indicated that a “substantial majority” of participants favored reducing the target range for the federal funds rate by 50 basis points to better align with recent inflation and labor market indicators. However, Federal Reserve Governor Michelle Bowman advocated for only a 25 basis point reduction.
Other members expressed caution regarding the initiation of the rate-cutting cycle with a half-point cut. “Several participants noted that a 25 basis point reduction would align with a gradual approach to policy normalization, allowing policymakers time to gauge the extent of policy restrictiveness as the economy progressed,” the minutes stated.
Regarding future rate cuts, members anticipated that if economic data aligned with expectations—specifically, if inflation sustainably declined to 2% and the economy approached maximum employment—it would likely be appropriate to shift towards a more neutral policy stance over time.
The Fed’s summary of economic projections indicated that members revised their forecast for rate cuts, now estimating a need for an additional 50 basis points of cuts compared to a previous estimate from June, which suggested only one cut. This adjustment would eventually bring the central bank’s benchmark rate to 2.9% by 2026.
Since the September meeting, however, incoming data has highlighted a stronger-than-expected labor market, raising doubts about further significant rate cuts and even prompting questions over whether the central bank might pause its rate-cutting trajectory. Analysts noted a shift in market expectations, with traders pricing in fewer rate cuts than the Fed had previously projected.
Despite the strong jobs report in September, some Fed members continued to support further rate cuts, interpreting the robust labor market as a signal that the economy could navigate a soft landing.
New York Fed President John Williams remarked, “I believe monetary policy is well positioned for future outlooks. The projections presented capture a solid baseline scenario, with an economy that continues to grow and inflation trending back to 2%.”