The minutes to the September 16-17 FOMC meeting highlighted the Committee’s lingering inflation concerns, even as it voted to cut rates to better manage risks. In particular, the minutes note that “downside risks to employment had increased over the intermeeting period and that upside risks to inflation had either diminished or not increased.” While most participants (voters and non-voters) saw this as appropriate cause to lower the funds rate, the minutes also record that “a few participants stated there was merit in keeping the federal funds rate unchanged at this meeting or that they could have supported such a decision.” We knew from the dot plot that one participant saw no need to cut rates this year, and the minutes suggest that person may have had some company in their cautious approach.

Even so, the minutes relate a general sense of unease about the health of the labor market. While the labor market remains in balance, the Committee discussion referenced several cautionary signals, such as the high concentration of job growth and low dynamism in hiring and separation rates, that may be flagging ongoing slowing in the jobs market. In sum, the minutes give a sense that the Committee could be on board with a few more insurance cuts, but barring a significant deterioration in the labor market would not sign up for an extended easing cycle deep into accommodative territory. The Committee apparently discussed balance sheet considerations at last month’s meeting. While no decisions were made, it was noted that it was becoming more important to monitor when money market conditions signaled that reserves were going from abundant to merely ample. The staff noted that reserves would diminish to $2.8 trillion by the end of 1Q; we infer this date was given as a cue to when balance sheet runoff could end. The staff also revised their GDP forecast up and their unemployment rate projection down—a revision that sits somewhat oddly next to the Committee action taken at the meeting.