According to minutes released Wednesday, the Federal Reserve will push ahead with two more interest rate cuts before the year ends, with Jerome Powell and the board almost entirely united on the decision.
The only fight left on the table was over whether they should aim for two or three cuts. The September 16–17 meeting closed with an 11–1 vote for a quarter-point reduction, dropping the federal funds rate to a 4%–4.25% target range, and setting the stage for more easing at the October and December meetings.
The official record said:
“In considering the outlook for monetary policy, almost 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 way to potential economic developments.”
Another passage read that:
“Participants expressed a range of views about the degree to which the current stance of monetary policy was restrictive and about the likely future path of policy. Most judged that it likely would be appropriate to ease policy further over the remainder of this year.”
Officials argue over cuts and Miran breaks ranks, as expected
The September session showed just how split officials were on the path ahead. Out of 19 officials, including 12 voting members, a tight 10–9 majority supported cutting at both of the last two meetings of the year. Projections also pointed to one more cut in 2026 and another in 2027, before stabilizing long-term policy around 3%.
The meeting was the first for Governor Steve Miran, sworn in hours before talks began. Miran made himself the lone dissent by pushing for a half-point cut instead of the quarter-point that was approved. His vote was recorded in the post-meeting statement.
Later, Miran told reporters he was the lone “dot” on the forecast chart calling for a more aggressive path of easing compared with everyone else on the committee.
While Miran wanted deeper reductions, some argued for restraint. The minutes recorded, “Some participants noted that, by several measures, financial conditions suggested that monetary policy may not be particularly restrictive, which they judged as warranting a cautious approach in the consideration of future policy changes.”
Labor weakness, tariff debate, and shutdown risks
Concerns over jobs were central. Officials said the labor market was weakening while inflation risks had either stayed the same or decreased. They explained:
“Participants generally noted that their judgments about this meeting’s appropriate policy action reflected a change in the balance of risks. In particular, most participants observed that it was appropriate to move the target range for the federal funds rate toward a more neutral setting because they judged that downside risks to employment had increased over the intermeeting period and that upside risks to inflation had either diminished or not increased.”
President Donald Trump’s tariffs also came up. The consensus was that his levies had raised prices this year but would not fuel lasting inflation. That cleared the way for more easing without fear of long-term price spikes.
Survey data from the Fed’s primary dealers backed the committee’s thinking. “Almost all respondents to the Desk survey expected a 25 basis point cut in the target range for the federal funds rate at this meeting, and around 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 year-end, with around half expecting three cuts over that time.”
For the uninitiated, one basis point equals 0.01%, meaning 25 basis points equals 0.25%.
The shutdown in Washington was another challenge. With the Labor Department and Commerce Department closed, officials are not getting new updates on inflation, unemployment, or consumer spending.
The minutes warned that if the government is still closed by the October 28–29 meeting, the board will be “flying blind” with no new data to guide decisions.
Market expectations are clear despite the chaos. Pricing shows a near certainty of two more cuts this year, according to the CME FedWatchTool.
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