The minutes of the September decision revealed that a “substantial majority” voted for a 50 basis-point interest rate reduction to the 4.75% – 5.00% target range, mostly because it would bring rates to “better alignment with recent indicators of inflation and the labor market.”
It may have helped that “some participants” already found a “plausible case” for a 25bps rate cut at the July meeting.
The minutes also showed that “almost all participants” saw upside risks to inflation have diminished, while downside risks to employment have increased.
But the decision to cut by 50bps wasn’t THAT popular, as the minutes noted that “some participants” would’ve preferred a 25bps cut and “a few others” would’ve supported the move, too.
In any case, members find it “important to convey” that the move “should not be seen as a sign of a more negative economic outlook“ or as a sign that “the pace of policy easing would be more rapid than participants’ assessments of the appropriate path.”
Link to official FOMC meeting minutes for September 2024
Fed members are also rejecting any pre-set path, emphasizing that additional adjustments to the target range are “conditional on incoming data, the evolving outlook, and the balance of risks.”
Market Reactions
U.S. dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar had been gaining ground thanks to fading expectations of Fed rate cuts and some profit-taking ahead of the U.S. CPI reports. But when the FOMC minutes revealed a ‘substantial majority’ favored a 50bps rate cut, the dollar briefly dipped.
It didn’t take long for the USD to bounce back, though, as the rest of the minutes showed that (a) there was support for a smaller cut, (b) the bigger cut wasn’t about economic concerns, and (c) the Fed isn’t sticking to any pre-set course.
The Greenback extended its early gains in the U.S. session, though it gave back some of those gains with minor pullbacks toward the end of the day.