Some members of the Federal Reserve noted that there was a reasonable argument for cutting interest rates by 25 basis points during the July meeting.
A few members expressed that they would have preferred a 25 basis point cut at the September meeting, and a handful of others indicated they might have supported that decision as well.
Several members mentioned that a 25 basis point cut would align with a gradual approach to normalizing monetary policy.
A few members added that a 25 basis point cut could indicate a clearer and more predictable path for future monetary policy adjustments.
Members generally agreed it was important to communicate that their decisions depend on how the economy evolves, the risks involved, and not on a fixed plan.
Several members discussed the importance of conveying that quantitative tightening (reducing the money supply) could continue for some time even if interest rates are lowered.
Almost all members agreed that the risks of inflation going up have decreased.
Most members said that the risks of job losses (downside risks to employment) have increased.
Several members cautioned that lowering policy restrictions too soon or too much could hinder or reverse the progress made in controlling inflation.
Some members noted that uncertainty about the long-term neutral interest rate makes it difficult to assess how restrictive the current policy is, which suggests that any reduction in restrictions should be gradual.
According to the staff’s outlook for the September meeting, the economy is expected to remain strong, although growth forecasts for the second half of 2024 have been lowered due to weaker-than-expected job market indicators.
A significant majority of Federal Open Market Committee (FOMC) members supported the idea of lowering rates by 50 basis points, according to the minutes from the Fed’s meetings on September 17-18.
Following the release of the Fed minutes, U.S. Treasury yields slightly decreased their gains, with the 10-year yield rising by 3.8 basis points to 4.073%.
The U.S. Treasury two-year yields also saw modest reductions in their gains, now at 4.011%.
