Minutes released Wednesday (October 8) showed that Federal Reserve officials strongly favored a rate cut at their September meeting, with the only disagreement seemingly centering on the number of cuts this year. The summary of the meeting indicated near-unanimous agreement among Federal Open Market Committee participants that the central bank's key overnight borrowing rate should be lowered due to labor market weakness.

However, officials disagreed on the specific implementation path, with a decision on whether to cut a total of two or three times this year—including the 25 basis point cut approved at the September 16-17 meeting.

The minutes stated: "In considering the outlook for monetary policy, 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 promptly to potential economic developments."

The minutes added: "Participants expressed a range of views regarding the current degree of restrictiveness of monetary policy and the likely path of policy moving forward. Most officials judged that further easing of policy would likely be appropriate over the remainder of the year."

One Vote Difference

The forecast materials released at the meeting highlighted subtle disagreements among the 19 FOMC officials (12 of whom have voting rights). Although the Federal Open Market Committee voted 11-1 to cut the benchmark interest rate by 25 basis points, participants expressed differing views on the extent of policy beyond 2025 and beyond. The rate cut lowered the target range for the federal funds rate to 4%-4.25%.

Ultimately, a narrow 10-9 majority favored implementing 25 basis point rate cuts at each of the remaining two meetings of the year. Projections suggest that further rate cuts are likely in 2026 and 2027, with the funds rate remaining in a long-term range of around 3%.

Diverse Positions

The meeting presented a diverse range of views. The September 16-17 meeting was the first for new Governor Stephen Miran, who was sworn in just hours before the meeting.

Miran stood out as the only voter in favor of a more aggressive easing path. While the minutes did not mention him by name, the post-meeting statement indicated that Miran dissented because he preferred a 50 basis point rate cut.

Furthermore, in subsequent public appearances, Miran acknowledged that he was the lone figure in the dot plot who advocated for a more aggressive easing path than the Committee.

Labor Market Concerns

At the same time, voices favoring a cautious rate cut were present at the meeting. The minutes noted: "Some participants noted that various indicators suggested that financial conditions might not be particularly restrictive for monetary policy, a view they judged warranting caution in considering future policy adjustments."

Officials expressed growing concern about labor market conditions, which they viewed as weakening while upside risks to inflation persisted, but still expected inflation to fall back to the Fed's 2% target. The minutes stated: "Participants generally noted that their judgments about appropriate policy actions for this meeting reflected the shifting balance of risks. In particular, most participants viewed adjusting the target range for the federal funds rate toward a more neutral level as appropriate, judging that downside risks to employment had intensified between meetings, while upside risks to inflation had either diminished or not intensified."

Tariffs and the Data Dilemma

Tariffs were a key topic of discussion, with widespread agreement that, while US President Trump's tariffs have pushed up prices this year, they will not be a major source of persistent inflation. The summary stated that the committee's stance on interest rates was consistent with the Fed's survey of primary dealers in financial markets.

The minutes noted: "Almost all survey respondents expected a 25 basis point rate cut at this meeting, and about half expected another rate cut at the October meeting. A significant majority of respondents expected at least two more 25 basis point rate cuts before the end of the year, with about half expecting three cumulative rate cuts this year." (One basis point equals 0.01%, and 25 basis points equals 0.25 percentage points.)

In addition to the unusually divergent views, policymakers also faced the impact of the government shutdown.

As the impasse persists, data agencies such as the Department of Labor and the Department of Commerce have ceased operations, neither releasing nor collecting data. If the shutdown continues until the October 28-29 FOMC meeting, policymakers will be flying blind with respect to key economic indicators such as inflation, unemployment, and consumer spending. Market pricing suggests the Fed is virtually certain to cut rates at its October and December meetings, but this decision could be affected by missing data.