Fed Minutes To Shed Light On Rate Cut Path Amid Ongoing Government Shutdown

Core Viewpoint - The Federal Reserve's decision to cut the policy rate by 25 basis points reflects concerns over slowing job gains and elevated inflation, with expectations for further cuts by the end of the year [2][3]. Group 1: Federal Reserve's Decision - The FOMC decided to cut the interest rate by 25 basis points to a range of 4%-4.25% during the September meeting [2]. - Fed Governor Stephen Miran advocated for a more aggressive cut of 50 basis points [1]. - The revised Summary of Economic Projections indicates an additional 50 basis points of cuts by the end of the year, followed by 25 basis points in 2026 and 2027 [2]. Group 2: Economic Outlook - Fed Chair Jerome Powell noted that job gains have slowed and acknowledged meaningful downside risks to the labor market [3]. - Powell mentioned that rising goods prices due to tariffs could lead to a one-time increase in inflation [3]. - Analysts from TD Securities expect the FOMC Minutes to reveal divisions within the Committee regarding the necessity of further easing, particularly in light of tariff-driven inflation risks [4]. Group 3: Market Reactions - The market is currently pricing in a 25 basis point cut in the October meeting and an 80% probability of another 25 basis point cut in December [5]. - The US Dollar could weaken if the Minutes confirm a willingness for further rate reductions, but could hold steady if officials express reluctance to lower rates due to improving labor market conditions or persistent inflation [6]. - Market reactions to the FOMC Minutes may be short-lived as investors remain focused on the US government shutdown developments [6].