A 'Substantial Majority' of Fed Favoured Large Cut in Sept, Minutes Show

• A "substantial majority" of U.S. Federal Reserve officials last month supported a half-point rate cut to start the turn towards easier monetary policy, but there appeared more universal agreement that the initial move would not commit the Fed to any particular pace of rate reductions in the future, minutes of the two-day policy meeting showed on Wednesday.
• The minutes provided further detail on the breadth of opinion within the Fed as policymakers approved a rate cut of a size usually reserved for moments when the central bank is worried the economy is slowing fast and needs the support of looser financial conditions. The half-point cut drew only a single dissent from Board of Governors member Michelle Bowman, but the minutes said "some" participants supported only a quarter-point cut, while "a few others indicated they could have supported such a decision."
• The minutes “paint a slightly more cautious picture” of the Fed’s approach to rate-cutting, wrote Oliver Allen, senior U.S. economist with Pantheon Macroeconomics, and “suggests that the unease about a 50 bp cut went beyond Governor Bowman.” Still, the minutes indicated that even some policymakers who may have favored an initial quarter-point cut went along with the larger one as a way to catch up with how fast inflation had fallen without putting future rate cuts “on a preset course.”
• Supporters of the half-point cut "observed that such a recalibration of the stance of monetary policy would begin to bring it into better alignment with recent indicators of inflation and the labor market," said the minutes of the Sept. 17-18 session, at which the Fed lowered the benchmark policy rate to a range of 4.75% to 5.00% from the 5.25% to 5.50% range it had maintained since July of 2023.

(Source: Reuters)