Fed minutes show some officials cautious about recent rate cut
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Federal Reserve chair Jerome Powell speaks at a news conference last month in Washington, D.C. Photo: Chip Somodevilla via Getty Images
A few Federal Reserve officials saw a case in keeping interest rates on hold last month, according to minutes from the central bank's policy meeting released on Wednesday.
Why it matters: It shows larger divisions among Fed officials than previously known at the most recent policy meeting, which concluded with the first rate cut in nearly a year.
What they're saying: "A few participants stated there was merit in keeping the federal funds rate unchanged at this meeting or that they could have supported such a decision," according to the minutes from the Sept. 16-17 meeting.
- Still, the minutes showed that "almost all" Fed officials supported the rate cut. Meanwhile, "most" said it would likely be appropriate for further rate cuts "over the remainder of the year."
The other side: The minutes show that a few officials remained wary of inflation risks, especially as President Trump tariffs ripple across the economy.
- "These participants noted that progress toward the Committee's 2 percent inflation objective had stalled this year as inflation readings increased," the minutes show.
- The officials fretted that Americans may expect higher inflation for longer — an outcome that could make price increases more difficult to stomp out — "if inflation does not return to its objective in a timely manner."
- The minutes also showed that "a few" officials said that progress on bringing inflation down "had stalled, even excluding the effects of this year's tariff increases."
Zoom in: The decision to cut rates by a quarter point last month was not unanimous, though the only official dissent was in favor of a larger interest rate cut.
- Fed governor Stephen Miran, who was confirmed to the post just two days prior, dissented in favor of a half-point cut.
Between the lines: The Fed cited cracks that had formed in the labor market as the key motivation for slashing rates.
- "Several participants saw continuing adoption of artificial intelligence as potentially reducing labor demand," the minutes show.
What to watch: During the meeting, some Fed officials noted that interest rates might not be restricting the economy as much as many believe, the minutes show.
- They said that "by several measures," financial conditions — a set of indicators that includes the stock market, which has been hitting record highs — "suggested that monetary policy may not be particularly restrictive."
- Those officials said that meant taking a "cautious approach in the consideration of future policy changes."
