WASHINGTON – Federal Reserve officials were divided over how much to lower interest rates in September, minutes from their last meeting showed, although most officials favoured the large half-point rate cut that central bankers ultimately made.
Noting that inflation was still “somewhat elevated while economic growth remained solid and unemployment remained low”, some participants observed that they would have preferred a quarter-point reduction, according to minutes from the Sept 17 and 18 gathering released Oct 9, with a few others indicating that “they could have supported such a decision”.
While one Fed governor, Ms Michelle Bowman, did vote against the Fed’s big rate cut in favour of a smaller move, the fresh minutes showed that she was not alone in her misgivings. They suggested that the merits of a smaller move were debated.
A few participants thought that a smaller move “could signal a more predictable path of economic normalisation”, the minutes showed.
The revelation that there was a spirited discussion about how much to cut rates at the Fed’s last meeting underscores what an uncertain juncture the central bank is facing. Officials are trying to calibrate policy so that it is cooling the economy enough to wrangle inflation fully, without slowing it so much that it plunges America into a recession. But that is an inexact science.
The Fed’s ultimate decision – to start off its rate-cutting campaign with a big reduction – came in response to a few economic trends. Inflation has been cooling substantially, job gains had slowed and the unemployment rate had recently moved up. Those factors suggested that it might be time to remove the Fed’s foot from the economic brakes by lowering rates decisively.
Now, though, it looks increasingly unlikely that Fed officials will make another large rate cut in 2024.
Hiring