Washington: US Federal Reserve officials were divided on the size of the rate cut in its recent policy meeting, according to the minutes of the Fed’s September 17-18 meeting.
“Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision,” the minutes showed on Wednesday.
Eleven out of the 12 voting members of the Federal Open Market Committee (FOMC) voted for the 50 basis point reduction, according to an earlier statement. Voting against this action was Michelle W. Bowman, who preferred to lower the target range for the federal funds rate by 25 basis points, Xinhua news agency reported.
“Several participants noted that a 25 basis point reduction would be in line with a gradual path of policy normalization that would allow policymakers time to assess the degree of policy restrictiveness as the economy evolved,” the minutes said.
“A few participants also added that a 25 basis point move could signal a more predictable path of policy normalization,” the minutes continued.
The minutes also noted that a few participants remarked that the overall path of policy normalization, rather than the specific amount of initial easing at this meeting, would be more important in determining the degree of policy restriction.
After its September 17-18 meeting, the Fed slashed the target range for the federal funds rate by 50 basis points to 4.75 per cent to 5 per cent, amid cooling inflation and a weakening labour market. This marked the first rate cut in over four years and signals the start of an easing cycle.
US Federal Reserve Chair Jerome Powell said recently that if the economic data stays stable, future rate cuts are expected to be smaller than the half-percentage-point reduction in September.
According to data released by the Labor Department on Friday, US employers added 254,000 jobs in September, as the unemployment rate edged down to 4.1 per cent, signalling that the labour market remains steady.
The Fed will hold its next policy meeting from November 6 to 7. The Chicago Mercantile Exchange Group’s FedWatch tool, which acts as a barometer for the market’s expectation of the Fed funds target rate, showed that as of Wednesday, the probability of the Fed cutting rates by 25 basis points at the November meeting is nearly 80 per cent.
