Is the U.S. economy too strong to be suppressed? Fed officials have divided opinions, "the chances of the Fed not cutting interest rates in November increase"

The Federal Open Market Committee (FOMC) announced the minutes of its monetary policy meeting held on September 17-18 last night, which showed that all Federal Reserve (Fed) officials agreed on a rate cut, but there was still disagreement on whether to cut rates by 1 basis point or 2 basis points.

What are the reasons for supporting a 1 basis point or 2 basis point rate cut?

According to the minutes, officials who supported a 1 basis point rate cut believed that it would be in line with the gradual normalization of policy, allowing policymakers time to assess their policy as the economy evolves. As for the reasons for a 2 basis point rate cut, the FOMC minutes pointed out that most officials considered the progress of inflation and the risks to the labor market:

It was generally felt that such a recalibration of the policy stance could be appropriate from the outset to address recent inflation and labor market indicators.

Some officials even believed that there were reasonable grounds for a 1 basis point rate cut in July, and the recent economic data had further strengthened their reasons for a rate cut.

Fed's Dudley: The Fed may cut rates once or twice more this year

After the release of the FOMC minutes, Fed official Dudley expressed full support for the 50 basis point rate cut in September, and said the Fed may cut rates 1 to 2 more times this year, but the magnitude of the September rate cut does not indicate the pace and magnitude of future rate cuts. However, Citadel Securities is more pessimistic about the rate cut expectations, believing that the strong US economy and stubborn inflation will lead the Fed to only cut rates once more this year. Michael de Pass, Citadel Securities' global head of rates trading, said:

I will boldly say that for the rest of this year, we will ultimately see only a 25 basis point rate cut, although the market still implies a 50 basis point rate cut, but this is a bit high given the strength of the underlying economy and the stickiness of inflation.

The market estimates that the Fed may not cut rates in November

In addition, according to the latest data from the CME Group's Fed Watch tool, compared to the previous consensus that the Fed would continue to cut rates in November, the market now believes that the probability of the Fed keeping the current interest rate unchanged in November has risen from 0 last week to 17.1%, the probability of a 1 basis point rate cut is 82.9%, and the probability of a 2 basis point rate cut has dropped to 0.