September FOMC minutes: 25 bps cut on table, members reject default path

The minutes of the September decision revealed that a “substantial majority” voted for a 50 basis point interest rate cut to the target range of 4.75% – 5.00%, mostly because it would bring rates to “better alignment with recent inflation and labor market indicators.”

It may have helped that “some participants” already found a “plausible case” for a 25bp rate cut at the July meeting.

The minutes also showed that “almost all participants” saw upside risks to inflation as diminishing, while downside risks to employment increased.

But the decision to reduce by 50 points per second was not as popular as the minutes stated “some participants” would have preferred a 25 bps reduction and “several others” also reportedly supported the move.

In any case, members feel it is “important to convey” this the move”should not be seen as a sign of a more negative economic outlook“ or as a sign that “the pace of policy relaxation would be faster than participants’ assessments of the appropriate path.”

Link to the official minutes of the September 2024 FOMC meeting

Fed members also reject any set pathpointing out that further adjustments to the target range are “conditioned by the data received, the evolution of perspectives and the balance of risks.“

Market reactions

US Dollar vs. Major Currencies: 5 min

USD Overlay vs. Major Currencies Chart by TradingView

The US dollar had gained ground on weakened expectations of a Fed rate cut and some earnings ahead of US CPI reports. But when the FOMC minutes revealed that a “substantial majority” favored a 50bp rate cut, the dollar briefly fell.

It didn’t take long for the USD to bounce back as the rest of the minutes showed that (a) there was support for a smaller cut, (b) the larger cut was not related to economic concerns, and (c) ) the Fed is not sticking to no predetermined course.

The greenback extended its early gains in the US session, although it gave back some of those gains with minor pullbacks towards the end of the day.