Fed minutes show Powell has more mutiny than expected for major new cuts

A document released this Wednesday by the central bank shows that some Fed members have expressed their opposition to the sharp 50 basis point interest rate cut. In particular, Federal Reserve minutes show that some of its members would prefer and support a 25 basis point rate cut. Among the main arguments in support of this position are the fact that this reduction “will be consistent with the gradual path of monetary policy normalization“, which would make it possible to accurately assess the degree of its limitation later in time.

The minutes also show that there are members of the organization who are completely unaware that inflation is on track to meet the 2% target that the Fed supports.”Almost all participants expressed great confidence that inflation is steadily approaching 2%”; In addition, the document states that “almost all participants assessed that the risks to achieving inflation and employment targets are in balance,” indicating that There are members who do not consider the situation, on both counts, to be so idyllic. as presented by the Fed.

Even before the publication of the protocol became known, the analyst Bloomberg EconomicsAnna Wong highlighted the possibility that Jerome Powell would have to use the art of persuasion.Whereas the dot plot reflects that a 50 basis point rate cut was not considered by some members of the Federal Open Market Committee. So they would have approved the cuts against expectations, and so all indications are that Powell “used the soft power of persuasion to get his colleagues to support him,” Wong says.

On the other hand, although the Fed’s minutes indicated that a “significant majority” of its members supported a massive 50 basis point rate cut, some operators read between the lines that there was stronger-than-expected opposition to the cut. . This led them to conclude that the central bank could maintain the price of money at current levels: thus, the probability of this event rising to 22.3%, when on Tuesday they were at 14.8%, and a week ago they were 0%. .

For its part, the US stock market continues to show growth: the Dow Jones and S&P 500 indices are at record highs. The industrial average rose 0.82% to 42,424 and the S&P 500 rose 0.52% to 5,781. Additionally, the Nasdaq 100 added 0.63% to 20,234, led by the chip sector.