Federal Reserve officials have signaled that they may lower interest rates again this year, but many showed caution because of ongoing inflation worries.
Divided views on Interest Rate Cuts
Minutes from the Federal Open Market Committee’s (FOMC) meeting on September 16–17 revealed that most members thought further rate cuts could be needed before the end of the year. However, many also warned that inflation could rise faster than expected.
At that meeting, officials voted 11–1 to reduce interest rates by a quarter percentage point, bringing the range down to 4%–4.25%. Stephen Miran, who had just joined the committee, voted against the move, saying he preferred a larger half-point cut, reported Bloomberg.
New forecasts released after the meeting showed that, on average, policymakers expect two more quarter-point cuts this year. Still, there were divisions where six of the 19 officials predicted one or no cuts in 2025.
Some Fed officials wanted to keep rates steady
The minutes showed that a few members were hesitant about lowering rates and believed keeping them unchanged would have been reasonable.
While the Fed noted that risks to the job market had grown, most members agreed that a sharp rise in unemployment was unlikely. They said recent data did not show any major weakening in employment conditions.
Fed officials, Trump push for rate cuts amid strong job market and data freeze
Since the September meeting, several Federal Reserve governors, including Vice Chairs Philip Jefferson and Michelle Bowman, have said that the strength of the labor market is one reason to lower interest rates. Stephen Miran has argued that the neutral interest rate is lower than many think, and therefore the Fed should cut rates quickly.
US President Donald Trump and some administration officials have also cited recent economic data while urging the Fed to reduce rates right away.
Market indicators, such as federal funds futures contracts, suggest that investors expect rate cuts in October and December, reported Bloomberg.
Officials said they would continue to balance the risks to both inflation and employment before deciding on their next move. The meeting minutes noted that “participants stressed the importance of taking a balanced approach in promoting the committee’s employment and inflation goals.”
The Fed met two weeks before the current government shutdown began, which has halted the release of key economic reports.