The Federal Reserve on Thursday set in motion a major move toward more possible interest rate cuts this year and next, but its forecasts for the path of interest rates suggest only a handful of policymakers may fully support the move.

That may be closer to reality than the suggestion that only Fed Governor Bowman was the lone voice against a big rate cut. Analysts reading the decision over the past 24 hours said as many as nine of the 19 policymakers may have dissented or only reluctantly supported the big cut.

However, a more complete record of the meeting will not be released until three weeks later. The Fed cut its policy rate by 50 basis points to 4.75%-5.00% at this meeting. Most analysts expected the Fed to cut interest rates by only 25 basis points.

But there were already signs that this week’s decision was a departure from the Fed’s last meeting, in July, when Chairman Jay Powell said “all 19” participants supported keeping the policy rate unchanged.

One hint came from Powell himself, in a post-meeting press conference.

Powell said, "There was a lot of back and forth, good diversity ... It was a great discussion today. I think there was broad support for the decision that the committee voted on."

Another hint came from Bowman’s dissenting vote, the first by a Fed governor in 19 years, following at least a year of speeches in which she argued for keeping policy tight for a long time.

But a chart of policymakers' expectations for the path of interest rates, known as the "dot plot," found that seven members expected the policy rate to be in a range of 4.5% to 4.75% by the end of the year, indicating that they expected only one 25 basis point cut in the Fed's last two meetings of the year, and two said they saw no change in the policy rate for the rest of the year.

Those forecasts may include some who are happy to start with big rate cuts, but analysts say it is likely a sign that many policymakers, not just Bowman, would prefer smaller cuts this week.

The decision to implement a more aggressive rate cut this time could open the way for the Fed to continue cutting rates faster and deeper than many policymakers, at least for now, seem to favor.

“The FOMC appears to be pushing for larger rate cuts,” Goldman economists wrote, abandoning their previous forecast for a slower pace of rate cuts in favor of what they now see as a more likely outcome: consecutive quarter-point rate cuts at each of the Fed’s next six meetings, through June of next year.

Tim Duy of SGH Macro Advisors expects the Fed to need to cut rates by another 50 basis points by the end of the year to cushion the economy, although he believes many policymakers today do not seem convinced that employment conditions are deteriorating fast enough to justify an initial 50 basis point cut.

Duy said many people “only grudgingly supported a 50 basis point cut,” noting a stark gap in the “dot plot” between the seven members who expected just 25 basis point cuts for the rest of the year and the nine who expected a 50 basis point cut.

“Powell has pretty much pulled everyone to a bigger rate cut, but it looks like the price he paid was downplaying the risks to the job market,” Duy said, noting that Powell did not address the risks to the job market at his press conference. The Fed said in its policy statement that risks to its employment and inflation goals are “roughly balanced.”

Deutsche Bank economists also noted the divergence in the “dot plot” and Powell’s use of the word “broad” to describe internal support for the move. All of this “reinforces the view that this is a difficult decision,” they said.

The article is forwarded from: Jinshi Data