The minutes reveal that there was disagreement among Fed officials regarding reducing interest rates by half a percentage point in September.

The Federal Reserve officials at their September meeting decided to cut interest rates by half a percentage point, as they were uncertain about the level of aggression needed, while trying to balance confidence on inflation with concerns over the labor market, according to the minutes released on Wednesday.

Policymakers approved a 50 basis point jumbo rate cut for the first time in over four years, with members expressing differing views on the economic outlook.

Officials hoped for a smaller, quarter percentage point reduction in inflation, while also seeking assurance that it was moving sustainably lower, and were less concerned about the jobs picture.

Since 2005, the Federal Open Market Committee has been known for its unity on monetary policy, but during its latest meeting, only one member, Governor Michelle Bowman, voted against the half-point cut, preferring a quarter point. The minutes indicated that others also favored a smaller move.

The minutes noted that some attendees expressed a preference for a 25 basis point reduction of the target range at the meeting, while a few others indicated their support for such a decision.

"The document stated that several participants believed a 25 basis point reduction would align with a gradual path of policy normalization, allowing policymakers to evaluate the level of policy restrictiveness as the economy progressed. Additionally, a few participants noted that a 25 basis point move could indicate a more predictable path of policy normalization."

After the meeting, economic indicators suggest that the labor market may be stronger than anticipated by officials who favored a 50 basis point move.

In September, the nonfarm payrolls rose by 254,000, exceeding expectations, and the unemployment rate decreased to 4.1%.

The Fed is likely to ease monetary policy, but future cuts may not be as aggressive as the September move.

The FOMC minutes indicated that the decision to reduce interest rates by 50 basis points was made "in light of the progress on inflation and the balance of risks" against the labor market. The minutes also noted that a "substantial majority" of the FOMC members supported the larger move, but did not specify how many were opposed. The use of the term "participants" implies that the entire FOMC was involved in the decision-making process.

At the July meeting, some members suggested reducing the minutes, but this proposal did not come to fruition.

Despite the document's detailed information on the debate over the 25 basis point cut, there was limited information on why voters backed the larger move.

In the minutes of the meeting, the term "recalibration" was used by Powell to describe the decision to cut.

The minutes noted that participants stressed the importance of clarifying that the adjustment of policy stance at the meeting did not indicate a less optimistic economic outlook or a faster pace of policy easing than what participants believed was appropriate.

The recalibration of policy to better align with recent indicators of inflation and the labor market would help sustain the strength in the economy and the labor market while continuing to promote progress on inflation, and would reflect the balance of risks. Supporters of the 50 basis point cut emphasized this point.

In the event of an emergency, the Fed may opt to cut rates by half a point, as it did during the Covid pandemic and the 2008 financial crisis.

The CME Group's FedWatch indicates that market pricing suggests the fed funds rate will end in 2025 between 3.25% and 3.5%, which is in line with the median projection of a 3.4% rate. However, futures markets have changed their outlook and now predict a 1-in-5 chance that the Fed will not cut at its November meeting.

The 10- and 2-year Treasury yields have increased by approximately 40 basis points since the Fed meeting, while the bond market has displayed unusual behavior.