Fed: Majority of Policymakers Favor More 2025 Rate Cuts

SECAUCUS, NJ (DTN) – Most policymakers on the Federal Reserve are leaning towards further monetary easing this year, after September’s first rate cut in nine months, the central bank said in minutes published on Wednesday (10/8) of its latest policy meeting.

“Most judged that it likely would be appropriate to ease policy further over the remainder of this year,” the Federal Open Market Committee (FOMC), the rates-setting panel of the central bank, said in the minutes of its September 17 meeting.  “The vast majority of survey respondents expected at least two 25 basis point cuts by year-end.”

The Fed, as it’s called, has two more decisions to make on rates at meetings scheduled for October 29 and December 10.

The FOMC dropped the federal funds rate by 25 basis points, or a quarter percentage point, at its September meeting, setting a new range of 4%-4.25% for the interest that banks charge each other on short-term loans and which also determines the rate Americans pay on their borrowings.

Since then, markets have been parsing all Fed statements, particularly remarks made by the various FOMC officials, for clues on whether September’s rate cut will extend through December.

Fed officials, led by Chairman Jerome Powell, typically engage in a tug-of-war with its dual mandate of keeping prices stable while creating maximum employment opportunity for Americans.

That was underscored by the FOMC minutes released on Wednesday, which noted that “inflation would be somewhat elevated in the near term” while “labor market conditions would be little changed” even under appropriate monetary policy.

U.S. inflation is currently at its highest point since January and has been consistently above the Fed’s 2% target for nearly five years now.

Jobs growth has, meanwhile, weakened, falling to levels not seen since 2021. A government shutdown since October 1 caused by a dispute over Congressional funding is also putting at risk wages and employment of federal workers, who total some 3 million.

The conflicting data has split FOMC officials on the best action forward. Some, like Supervision Vice Chair Michelle Bowman and Governor Stephen Miran, have advocated for continuous rate cuts. Others, like St. Louis and Kansas City Fed Presidents Alberto Musalem and Jeffrey Schmid, have urged more caution.