Meeting minutes released Wednesday showed that Fed officials in September were strongly leaning toward cutting interest rates, and the only disagreement appeared to be over how many cuts would come.
the For paymentThe y pointed to a near consensus among participants in the Federal Open Market Committee on the necessity of lowering the central bank’s key overnight borrowing rate due to weakness in the labor market.
But they were divided on whether there should be two or three overall cuts this year, including the quarter-point step approved at the Sept. 16-17 meeting.
“When considering the monetary policy outlook, nearly all participants noted that with the reduction in the target range for the federal funds rate at this meeting, the Committee was well positioned to respond in a timely manner to potential economic developments,” the minutes said.
“Participants expressed a range of views on how restrictive the current monetary policy stance is and on the likely future path of policy,” the document added. “Most felt that it would likely be appropriate to ease the policy further over the remainder of this year.”
By one vote
Forecast materials released at the meeting showed a close split among the 19 officials who participate in FOMC meetings, with 12 of them entitled to vote.
While the full Federal Open Market Committee voted 11-1 to cut the benchmark interest rate by a quarter of a percentage point, participants had varying views on how aggressive they should be over the rest of 2025 and the next several years. This cut reduced the federal funds rate to a target range of 4% to 4.25%.
Ultimately, a slight majority (10 to 9) favored the equivalent of cuts of a quarter of a percentage point at each of the remaining two meetings this year. Forecast materials indicated the possibility of another cut in 2026 and 2027 before the funds rate stabilizes in a long-term range of around 3%.
However, the meeting witnessed a range of viewpoints. The session, held Sept. 16-17, was the first for newly appointed Governor Stephen Merran, who took office just hours before the start.
Miran singled himself out as the only voter who preferred a more aggressive path to facilitation. Although the minutes did not identify individual participants, a post-meeting statement indicated that Miran was the dissenting vote, favoring instead a half-point demotion.
Moreover, in his subsequent public appearances, Miran indicated that he was merely a single “point” indicating a much more aggressive course than the rest of the committee members.
Concerns about the labor market
The meeting appeared to witness different viewpoints, as some preferred a more cautious approach to the cuts.
“Some participants noted that by several measures, financial conditions suggest that monetary policy may not be particularly restrictive, which they considered warrants a cautious approach in considering future policy changes,” the minutes said.
Officials were increasingly concerned about the state of the labor market, which they saw as weakening with continued upward threats to inflation although they still expected it to decline to the Fed’s 2% target.
“Participants generally noted that their judgments about policy were appropriate for this meeting
“The measure reflects a shift in the balance of risks,” the minutes stated. “In particular, most participants noted that it was appropriate to move the target range for the federal funds rate toward a more neutral position because they viewed downside risks to employment to have increased over the intervening period and upside risks to inflation either diminished or did not increase.”
Definitions were an important part of the discussion, with the general feeling that Pres Donald TrumpTariffs will not be a major source of permanent inflation after they pushed prices higher this year.
The committee’s sentiment on interest rates matches a survey the Fed sends to primary dealers in financial markets, the summary said.
“Almost all desk survey respondents expected a 25 basis point cut in the target range for the federal funds rate at this meeting, and about half expected an additional cut at the October meeting,” the minutes said. “The vast majority of survey respondents expected at least two 25 basis point cuts by the end of the year, with about half expecting three cuts over that time.”
One basis point equals 0.01%, so a 25 basis point movement is equivalent to a quarter of a percentage point.
Along with the unusual level of diverse opinions, policymakers are now facing the fallout from the government shutdown. Data providers such as the Departments of Labor and Commerce have shut down operations while the impasse continues and are not releasing or collecting data.
If the shutdown does not end by the FOMC meeting on October 28-29, policymakers will essentially overlook key economic measures of inflation, unemployment and consumer spending. Market pricing indicates near certainty that the Fed will cut interest rates at the next meeting and at another meeting in December, but that decision may be affected by a lack of data.
Correction: An earlier version incorrectly attributed the opinion of the market study to that of Federal Reserve officials. A survey of market participants indicated that “about half” expect three total cuts this year.
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