Minutes from the Fed’s September 16–17 meeting, released overnight, show the Committee leaning toward additional rate cuts this year while emphasizing the need for caution in the pace of easing. “Most judged that it likely would be appropriate to ease policy further over the remainder of this year,” the minutes said.
But, officials also acknowledged a “range of views” about how restrictive policy currently is and how fast it should be relaxed. Some members cautioned that “financial conditions suggested monetary policy may not be particularly restrictive,” arguing for patience.
In a key passage, the Committee “stressed the importance of taking a balanced approach” to achieving its dual goals, mindful of “the extent of departures from those goals” and the “different time horizons” for inflation and employment to normalize.
Currently, Core PCE is at 2.9% and unemployment at 4.3%. The Summary of Economic Projections showed inflation to rise to 3.1% by year end, and then only decline gradually to 2.6% in 2026, and 2.1% in 2027. Unemployment is forecast to edge up modestly to 4.5% and then stabilizes.
That combination means the economy is at risk of policy over-restriction: keeping rates too high for too long could cause a sharper, sustained rise in unemployment. But — and this is the key point — the pace of that easing must be gradual as inflation would only slow over the next two years. That means the Fed can’t risk loosening so fast that it reignites price pressures or unanchors expectations.
At the meeting, Fed cut interest rates by 25bps to 4.00-4.25%, with Governor Stephen Miran as the only dissenter voting for a 50bps reduction.
