Fed minutes reveal policymakers divided on rate cuts

The Federal Reserve released the minutes from its monetary policy meeting held on Sept. 17-18, during which it concluded its tightening cycle and lowered the interest rate to a range between 4.75% and 5%. Only one member had voted for a slower pace of cuts.

The minutes, published on Oct. 9, indicated that some participants favored a 25-basis-point (bps) reduction in the target range for borrowing costs, marking the first division of opinions since 2005.

Several participants highlighted that a 25-bps cut would align with a gradual approach, allowing policymakers time to assess the extent of monetary restraint as the economy evolves.

For the first time, policymakers expressed greater confidence in the sustainable movement of inflation toward the Federal Open Market Committee's (FOMC) target of 2%. Their decision was based on progress made in inflation and a balanced view of risks.

The committee pointed out that it would continue to monitor the effects of incoming data on economic forecasts and would be ready to adjust its monetary policy stance as necessary if risks emerge that could hinder its objectives.

Available information at the time of the meeting suggested that real GDP expanded robustly since the beginning of the year, while the pace of job additions slowed, unemployment rates had risen, alongside a decline in year-on-year inflation rates.

This comes as market expectations for monetary policy shift, with a 50-bps cut now ruled out. Investors anticipate a 25-bps reduction in the upcoming meetings in November and December, concluding the year with a target range between 4.25% and 4.5%.