Not everyone on board with 50 bps rate cut – OCBC

The main takeaway from the US Federal Reserve’s (Fed) minutes of its September 17/18, 2024 meeting of the Federal Open Market Committee (FOMC) was that while all participants agreed that it is appropriate to ease the policy stance monetary policy in September, but not everyone agreed with the decision to cut the rate by 50 bps, note OCBC FX analysts Frances Cheung and Christopher Wong.

The FOMC processes the main conclusions

“The main reason for the start of easing was ‘greater confidence that inflation is moving sustainably towards 2%’, while the overall assessment of the labor market was ‘solid’, although many participants saw the assessment of the labor market as challenging.”

“”Some participants noted that they would have preferred a 25 basis point” and “a few others indicated that they might have supported such a decision” – this reflects greater support for a 25 basis point reduction basis compared to voting with only one dissenter.”

“The 50 basis point cut was partly a catch-up as ‘there was a plausible case for a 25 basis point rate cut at the previous (July) meeting.’ Our base case remains for a 25bp cut each at the November and December FOMC meeting.”