Minutes from the U.S. Federal Reserve’s September policy meeting show that officials at the central bank were deeply divided over whether to lower interest rates by 50 or 25-basis points.
Fed officials ultimately decided to lower interest rates by 50-basis points on Sept. 18, the first reduction in rates since the onset of the Covid-19 pandemic in spring 2020.
But the meeting summary shows that central bank officials were at odds over how to ease monetary policy as data shows that inflation is receding and the U.S. economy is slowing.
One Fed member, Governor Michelle Bowman, voted against the 50-basis point cut, saying she would have preferred a quarter point rate reduction. Bowman was the first governor to dissent on an interest rate vote since 2005.
However, the meeting minutes show that several other Fed officials also favored a 25-basis point cut and that they felt a half percentage point reduction was too aggressive.
Since the September meeting, economic data has showed that the U.S. labour market is likely stronger than Fed officials previously thought or realized.
In September, the U.S. economy added 254,000 jobs, much more than the 150,000 that was forecast. America’s unemployment rate currently stands at 4.1%.
The strong September jobs report, and other recent data, has led Wall Street to expect that the Fed will move more slowly on interest rate reductions in coming months.
A majority of futures traders are betting that the central bank will lower interest rates by 25-basis points at each of its two remaining meetings this year, on Nov. 7 and Dec. 18.