Officials at the U.S. Federal Reserve were divided over whether to lower interest rates by 50 or 25-basis points at their September 18 policy meeting, according to just released minutes.
The meeting summary shows a central bank that is divided over how to ease monetary policy as data shows that inflation is receding and the U.S. economy is slowing. Fed officials ultimately decided to lower interest rates by 50-basis points, the first reduction in rates since the onset of the pandemic in 2020.
Only one Fed member, Governor Michelle Bowman, voted against the 50-basis point cut, saying she would have preferred a quarter point interest rate reduction. But the meeting minutes show that other Fed officials also favored a 25-basis point cut. Bowman was the first governor to dissent on an interest rate vote since 2005, indicating the strong differences of opinion at the central bank.
The Fed’s Next Move?
Minutes from the Federal Reserve’s meetings are instructive because they show how officials at the central bank are thinking about the economy, inflation, and interest rates. Since the September 18 policy meeting, economic data has showed that the U.S. labor market is likely stronger than Fed officials who favored a 50-basis point cut realized.
In September, the U.S. economy added 254,000 jobs, much more than the 150,000 that was forecast. America’s unemployment rate stands at 4.1%. That labor report has helped to cement expectations that the Fed will be more dovish moving forward.
A majority of futures traders are betting that the central bank will lower interest rates by 25-basis points at each of its two remaining meetings this year, on November 7 and December 18.
Is the SPDR S&P 500 ETF Trust a Buy?
The SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 index, has a consensus Moderate Buy rating among 504 Wall Street analysts. That rating is based on 403 Buy, 93 Hold and eight Sell recommendations issued in the last three months. The average SPY price target of $625.36 implies 8.92% upside from current levels.
