In the early morning of October 10th, Beijing time, the Federal Reserve released the minutes of its latest interest rate meeting, which detailed the reasons why Federal Reserve officials decided to cut interest rates by 50 basis points in September, as well as the latest analysis on the future path of monetary policy.
The minutes of the meeting showed that the "vast majority" of officials attending the meeting agreed to a 50 basis point rate cut, but "some participants" said a 25 basis point rate cut would be a better option, and some officials might have voted for a 25 basis point rate cut.
Officials who support a larger rate cut believe that choosing a 50 basis point cut for the first time would align with the latest inflation and labor market data, thereby helping maintain employment and economic strength while continuing to make progress in reducing inflation.
Federal Reserve officials who believe that a 25 basis point rate cut is more reasonable emphasize that adopting a model of rate cuts that exceed expectations is inconsistent with the Fed's intention to gradually lower the policy interest rate; at the same time, the economic data itself only supports rate cuts, but does not point to an extraordinary rate cut.
Some officials at the meeting believed that with economic growth remaining stable and employment at a low level, a 25 basis point rate cut would be more in line with the path of gradually normalizing monetary policy and would give the Fed more time to assess economic progress. These officials added that steadily advancing a 25 basis point rate cut would also show signs of a more predictable monetary policy path.
At the same time, there are different views within the Federal Reserve on the degree of tightening. Some officials stressed the need to communicate with the outside world and that even if interest rates are cut, balance sheet reduction may continue for some time.
This means that there are major differences within the Federal Reserve regarding the 50 basis point interest rate cut in September.
Regarding the future interest rate cut path that the market is highly concerned about, the meeting minutes showed that if inflation continues to decline toward the Fed's 2% policy target and employment maintains its recent expansion trend, a more neutral stance may be appropriate over time.
The minutes of the meeting showed that the Fed's monetary policy decisions have no preset course and depend on economic development, the impact of economic prospects, and the balance of employment and inflation risks.
When discussing the outlook for monetary policy, Federal Reserve policymakers emphasized that the outside world should understand that the 50 basis point rate cut in September should not be seen as the Fed's expectation of a poor economic outlook. They believe that decisions depend on the development of the economic situation, the impact on the economic outlook, and the balance of risks in employment and inflation.
In terms of economic outlook, at the September interest rate meeting, Federal Reserve officials predicted that the U.S. economy will remain robust, with forecasts for real GDP growth roughly the same as at the July meeting, but the unemployment rate slightly higher than expected in July.
Regarding the inflation outlook, the minutes showed that "almost all participating officials expressed their confidence that inflation would continue to move closer to 2%."
