Don't be fooled by the Fed's statement! Many committee members may not agree to a large 50 basis point cut

The Federal Reserve launched a major move on Thursday to cut interest rates this year and next, but only a few policymakers may fully support this move based on their interest rate path forecasts. This may be closer to reality than the indication that only Fed Governor Bowman opposed a significant rate cut. Analysts interpreting the decision in the past 24 hours suggest that as many as 9 out of the 19 policymakers may have reservations about this move, or are reluctantly supporting a significant rate cut. However, the more complete record of the meeting will not be released until three weeks later. The Fed lowered its policy rate by 50 basis points in this meeting, bringing it to 4.75%-5.00%, while most analysts expected a 25 basis point cut. There are already signs that this week's decision is different from the Fed's last meeting (July meeting), where Fed Chair Powell stated that "all 19" participants supported keeping the policy rate unchanged. One hint comes from Powell himself at the post-meeting press conference. Powell said, "There was a lot of back and forth, a good diversity... It was a great discussion today. I think the decision that the committee voted on also had broad support." Another hint comes from Bowman's dissent, marking the first time in 19 years that a Fed governor voted against, after at least a year of advocating for long-term policy tightening. However, according to the decision-makers' interest rate path expectations chart known as the "dot plot," 7 members expect the year-end policy rate to be in the range of 4.5%-4.75%, indicating they expect only one 25 basis point rate cut in the Fed's last two meetings this year, with two members indicating they believe there will be no change in the policy rate for the rest of the year. These forecasts may include some who are willing to start significant rate cuts, but analysts suggest that this likely indicates that many policymakers (not just Bowman) this week prefer to take smaller rate cut steps. Implementing a more aggressive rate cut this time may pave the way for the Fed to continue cutting rates at a faster and larger pace than many policymakers (at least for now) support. "The FOMC seems to be pursuing a larger rate cut," wrote Goldman Sachs economists, abandoning their previous forecast of a slowdown in the rate cut pace and instead supporting what they now see as the more likely outcome: cutting rates by 25 basis points at each of the Fed's next six meetings, continuing until June next year. Tim Duy of SGH Macro Advisors expects the Fed to cut rates by another 50 basis points before the end of this year to cushion the economy, although he believes that many policymakers today do not seem to believe that the pace of deterioration in employment is fast enough to support an initial 50 basis point cut. Duy stated that many are "reluctantly supporting a 50 basis point rate cut," pointing out a clear gap between the seven members in the "dot plot" expecting only a 25 basis point cut for the remainder of the year and the nine members expecting a 50 basis point cut Duy said, "Powell has almost dragged everyone to a larger rate cut, but it seems that the cost he paid is the underestimation of risks to the job market," pointing out that Powell did not mention the risks to the job market at the press conference. The Fed stated in its policy statement that the risks to its employment and inflation targets are "broadly balanced." Economists at Deutsche Bank also noted the divergence in the "dot plot" and Powell's use of the word "broad" to describe internal support for the move. They said, "All of this reinforces the view that this was a difficult decision."