Freshly released minutes from the central bank’s September meeting show that policymakers were divided on how much to cut rates.The New York Times reports that the recently released minutes from the Federal Reserve’s September meeting revealed a division among policymakers on the appropriate amount to cut interest rates. While most officials ultimately favored a half-point reduction, some expressed a preference for a smaller quarter-point cut.

The minutes showed that some participants believed inflation was still somewhat high and the economy was performing well, making a smaller rate cut more appropriate. Others argued that a smaller cut could signal a more predictable path for economic normalization.

The discussion surrounding the size of the rate cut highlights the uncertainty the Fed is facing in trying to balance economic growth and inflation. The Fed’s decision to start its rate-cutting campaign with a large reduction was based on factors such as cooling inflation, slower job gains, and a slight increase in the unemployment rate.

However, recent data showing an uptick in hiring and strong consumer spending has led to speculation that the Fed may not make another large rate cut this year. Instead, officials have signaled that they will likely follow the economic projections released after the September meeting, which suggested two quarter-point cuts in November and December.

The next major decision for the Fed is when to stop shrinking its balance sheet of bond holdings, which were purchased in large amounts during the pandemic. The minutes indicate that officials are currently inclined to continue with their plan of allowing securities to expire without reinvesting them.

Overall, the minutes reveal the ongoing challenges the Fed faces in navigating the economy and highlight the importance of carefully considering economic data and projections in their decision-making process. 

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