The Federal Reserve could be inching toward two more interest-rate cuts this year, and Wednesday’s meeting minutes may show how the majority of officials are thinking about future rate cuts.
The minutes, due out at 2 p.m. Eastern time, cover the Fed’s Sept. 16-17 policy meeting, where officials lowered rates by a quarter percentage point to between 4.00% and 4.25% and signaled two more cuts by year-end.
Investors will be reading for clues about whether the Fed’s easing trajectory will continue or come to a pause next month.
Inflation is at its highest since January and has remained above the Fed’s 2% goal for nearly five years. At the same time, the labor market is weakening and income growth expectations have slid to their lowest levels since 2021. That makes it difficult for policymakers to determine what’s needed—do they lower rates to stimulate economic growth or keep rates elevated to fight persistent inflation?
Several officials, including Vice Chair for Supervision Michelle Bowman and Gov. Stephen Miran, have called for further cuts while other Fed officials, like St. Louis and Kansas City Fed presidents Alberto Musalem and Jeffrey Schmid have signaled more caution and a possible pause at the Oct. 28-29 meeting.
Last month’s economic projections showed that 10 officials thought there should be two more cuts this year while nine wanted there to be one or fewer. Fed officials are clearly at odds over how to proceed with rate cuts. The minutes may help illuminate where the disagreement lies and how divided officials are about what comes next.
“We expect to see considerable disagreement in these minutes,” wrote Sam Tombs of Pantheon Macro. “But nothing beyond what we already heard from the raft of individual members’ speeches over the last three weeks.”
The minutes may also reflect the dovish shift in the balance of risks, said analysts at Citi. “There was general agreement that the balance of risks had shifted toward downside risk to employment,” they wrote. “For the majority of Fed officials that means cutting further this year, but others are more concerned about inflation and will advocate caution on further cuts.”
If that is the case, it would reinforce market expectations for an October move. Investors are currently pricing in a 95% chance that Fed officials lower rates at its coming meeting and a 81% chance they lower rates again at their December meeting, according to the CME FedWatch tool.
Fed Chair Jerome Powell said after the September meeting that “you could think of this in a way as a risk management cut,” signaling that further moves would be cautious and data-dependent.
Of course much has changed since last month’s meeting. Notably, the government shutdown has delayed the release of September’s jobs report and could lead to mass layoffs of government workers. On Tuesday, President Donald Trump hinted that furloughed federal workers may not be guaranteed backpay, further reducing their spending power.
Wednesday’s minutes will be a snapshot from a different moment, but they still offer a rare look under the hood at how unified, or not, the Fed really is.