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Some of the Federal Reserve’s top officials would have preferred to keep borrowing costs on hold last month, highlighting concerns among policymakers that elevated inflation still poses a threat to the US economy.
The rate-setting Federal Open Market Committee cut borrowing costs for the first time this year in September, lowering the benchmark federal funds target range by a quarter-point to 4-4.25 per cent amid signs of a weakening jobs market.
However, the minutes of the mid-September vote showed that “a few” of the FOMC would have supported a decision to keep borrowing costs unchanged as inflation was in danger of remaining above the central bank’s goal.
Progress towards the 2 per cent goal “had stalled this year as inflation readings increased”, the minutes said, adding that a few members had “expressed concern that longer-term inflation expectations may rise if inflation does not return to its objective in a timely manner”.
The Fed’s preferred measure of inflation came in at 2.7 per cent in the year to August — slightly higher than the 2.6 per cent reading for July.
The two-year Treasury yield, which moves with interest rate expectations, ticked higher on the release of the minutes, rising 0.03 percentage points to 3.59 per cent on Wednesday afternoon.
The minutes highlight that Fed officials may be more divided over what happens to monetary policy than the initial decision suggested.
The 12 voting members of the FOMC backed the cut by 11-1, with Stephen Miran, an ally of President Donald Trump and economic adviser who joined the Fed just before the meeting, supporting a bigger half-point move.
The committee contains a total of 19 members, with seven of the 12 regional presidents unable to vote at any one time.
Projections released at the time of the meeting showed a slim majority of the committee backed making at least two quarter-point cuts later this year.
Miran was alone in projecting much steeper cuts from the central bank, while one member of the committee thought borrowing costs should end the year a quarter-point higher than they are now.
While inflation has risen in 2025 on the back of Trump’s tariffs, Fed officials in favour of more cuts think the inflationary impact of the president’s trade policies will remain limited to US imports and will not have knock-on effects.
Meanwhile, a sharp drop-off in non-farm payrolls figures has led to concerns that the US labour market could be about to weaken substantially.
The Fed targets full employment alongside inflation of 2 per cent.
The decision to cut rates came after months from pressure from Trump, who had berated Fed chair Jay Powell as a “numbskull” who was “too late” to loosen monetary policy.
Trump has sought to increase his influence over the central bank, although his efforts to immediately sack governor Lisa Cook were stalled by a ruling from the Supreme Court earlier this month.
Additional reporting by Kate Duguid in New York
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