The U.S. Federal Reserve (Fed) released minutes from its September rate meeting on Wednesday night. The minutes indicated that "some participants" in the rate-setting committee would have preferred a single rate cut, with many potentially supporting such a decision.
First Dissent in 19 Years
The Fed, led by Chairman Jerome Powell, reduced rates by 0.5 percentage points at their last meeting, which was larger than many analysts anticipated.
In justifying the cut, the Fed pointed to continued solid economic growth and inflation being more under control than before. However, the Fed also placed more emphasis on the labor market. Prior to this, Fed Chairman Jerome Powell had indicated he did not want further cooling of the labor market, especially after July's job numbers came in lower than expected, causing recession fears in the markets.
The minutes also revealed that the committee expects unemployment by the end of 2024 to be "somewhat higher" than previously estimated but mostly flat from 2025 to 2027. Michelle Bowman of the Federal Reserve was the lone dissenter against the double cut in September. In connection with the September rate cut, it was also revealed that one of the 12 members of the FOMC dissented, the first in 19 years. Bowman, like the majority, favored a less tight monetary policy but believed a "single" cut of 0.25 percentage points was sufficient. "The U.S. economy remains strong," Bowman stated.
"We have not yet reached our inflation target," she affirmed. Market Prices in Single Cut The rate minutes are three weeks old. Since then, several figures have come out that the Fed considers when setting rates. Last Friday, U.S. job numbers for September came in much stronger than expected, with 254,000 jobs created against an anticipated 150,000. This led to the uncertainty about whether there would be a single or double cut at the November meeting disappearing. On Wednesday night, the market was pricing in about an 80% chance for a "single" cut, according to the CME FedWatch Tool. The remaining percentages predict that the U.S. rate level will remain in the range of 4.75% to 5%.