Did only one person oppose the significant rate cut by the Federal Reserve in September? The answer will be revealed tonight

Last month, the Federal Reserve cut interest rates by 50 basis points. The minutes of this meeting are scheduled to be released early Thursday morning Beijing time, which may ultimately reveal the extent of the divergence among decision-makers over this decision that surprised many economists. At this meeting, a board member expressed dissenting views for the first time in 19 years.

Federal Reserve Chairman Powell stated at a post-meeting press conference that the support for a 50 basis point rate cut was "broad". Even dissenting board member Bowman agreed that it was time to ease monetary policy, but she leaned towards a smaller 25 basis point rate cut to guard against what she believed were lingering inflation risks.

However, Powell also acknowledged that there was "considerable diversity of views" surrounding this decision, and Federal Reserve policymakers had unusually wide-ranging forecasts for what would happen in the next three months.

In the dot plot released at the Federal Reserve meeting in September, policymakers expected rates to fall further by 0 to 75 basis points by the end of the year, a difference that aligns with the Fed's forecast in September 2022 when officials were still raising rates and debating how much tightening was needed to curb inflation. However, such a difference had not occurred before that, until it reappeared in September 2016.

The minutes of the Federal Reserve meetings detail the back-and-forth communications between policymakers and staff during the two-day meetings. These minutes include sections on economic and financial outlooks, officials' views on appropriate monetary policy, and the risks they see facing the economy.

While this document is lagging, typically released three weeks after each Fed meeting, it also serves to better elucidate the opinions and disagreements behind each policy vote to the public and investors. This may also provide clues on how the Fed might respond to upcoming economic data.

Economists at Citigroup wrote on Monday that these minutes "may reveal officials' threshold for cutting policy rates at a faster pace".

Investors currently expect the Fed to cut the benchmark rate by another 25 basis points at the meeting on November 6-7, and to cut rates again by 25 basis points in December.

This document may also clarify whether a 50 basis point rate cut was a difficult decision for its supporters. While only one member dissented, this does not indicate the views of the 7 non-voting participants at the meeting on this measure, nor does it indicate how the voters viewed their choices.

Richmond Fed President Barkin, a voting member this year, stated in an interview last week that he supported a 50 basis point rate cut, but he also remained open to a smaller cut and did not see a significant macroeconomic difference between the two approaches. He noted that starting with a larger rate cut is consistent with the policy path proposed by almost all 19 Fed officials.

For example, 9 officials expected that four 25 basis point rate cuts throughout 2024 would be appropriate, while another 7 officials expected only three cuts Barkin said, "If you're going to end up in this range eventually... a 50 basis point cut is reasonable. A 25 basis point cut is also reasonable. I can fully support a vote for a 50 basis point cut."

Powell and other officials pointed out that the Fed can adjust the pace and magnitude of rate cuts based on the development of the economy and inflation.

Last Friday's employment report reinforced investors' belief that the Fed will reduce the rate cut to 25 basis points at the meeting on November 6th and 7th. The report showed that non-farm payrolls exceeded expectations, the unemployment rate declined, and wage growth was at 4%, still above the level policymakers consider consistent with their 2% inflation target.

The latest inflation data to be released this Thursday will be the latest key data point in this debate. As long as there is evidence that price pressures continue to ease, policymakers are generally willing to continue cutting rates.