Fed Meeting Insights: Future Rate Cuts Discussed

In a detailed analysis of the Federal Reserve's September meeting, Deutsche Bank's senior economist Brett Ryan sheds light on the debates among officials regarding interest rate cuts. The meeting revealed a lively discussion about whether to implement a smaller cut of 25 basis points or a larger cut of 50 basis points. While some officials championed gradual easing, a substantial majority leaned towards a more significant cut. Ryan emphasizes that a strong desire for careful and gradual adjustments prevails, especially considering the potential risks associated with over-easing financial conditions and its impact on inflation trajectories. The Federal Reserve's funds futures curve aligns with Deutsche Bank's forecast of maintaining 25 basis points rate cuts in the upcoming months, transitioning to a quarterly pace by September next year. Ryan also notes potential disruptions in economic data due to recent hurricanes, stressing the necessity for the Fed to stay the course. While a no-cut scenario for November seems unlikely without a major inflation surprise, ongoing labor market trends indicate complexities as they reflect a cooling labor market without further deterioration. Only robust employment reports could prompt reconsideration of current restrictive measures in place.