Since the last FOMC meeting on September 18th, bonds have suffered a bloodbath while gold, stocks, and the dollar are all up modestly...

Source: Bloomberg

Despite the apparent dovish pivot, the market's expectations for rate-cuts (this year and next) has plunged dramatically...

Source: Bloomberg

This should not come as a huge surprise as Powell's raison d'etre for major rate cuts evaporated as US macro data has surged higher, surprising to the upside almost non-stop...

Source: Bloomberg

It's hard to justify slashing rates any further in the face of that macro backdrop without exposing the 'political' decision-making process behind The Fed's move.

So, now we see the Minutes - what exactly is it that The Fed wants us to believe they are thinking?

Despite there only being one dissent, The Fed Minutes suggest that the members are considerably more divided than headlines suggested...

• Given the significant progress made since the Committee first set its target range for the federal funds rate at 5-1/4 to 5-1/2 percent, a substantial majority of participants supported lowering the target range for the federal funds rate by 50 basis points to 4-3/4 to 5 percent. These participants generally observed that such a recalibration of the stance of monetary policy would begin to bring it into better alignment with recent indicators of inflation and the labor market. They also emphasized that such a move 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.

• Some participants noted that there had been a plausible case for a 25 basis point rate cut at the previous meeting and that data over the intermeeting period had provided further evidence that inflation was on a sustainable path toward 2 percent while the labor market continued to cool. However, noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision.

• Several participants noted that a 25 basis point reduction would be in line with a gradual path of policy normalization that would allow policymakers time to assess the degree of policy restrictiveness as the economy evolved.

• A few participants also added that a 25 basis point move could signal a more predictable path of policy normalization.

• A few participants remarked that the overall path of policy normalization, rather than the specific amount of initial easing at this meeting, would be more important in determining the degree of policy restriction. Participants judged that it was appropriate to continue the process of reducing the Federal Reserve's securities holdings.

Breaking down some specific topics...

INFLATION

• Almost all participants agreed upside risks to inflation had diminished.

• Several participants remarked reducing policy restraint too soon or too much could risk stalling or reversal of progress on inflation.

ECONOMIC OUTLOOK

• Staff outlook for the September meeting was for the economy to remain 'solid': though the forecast for growth in H2 24 was 'marked' down reflecting softer-than-expected labour indicators.

ECONOMY

• Participants generally noted it was important to communicate decisions are conditional on evolution of economy, implications for balance of risks and therefore not on a preset course.

EMPLOYMENT

• Most participants noted downside risks to employment had increased.

Read the full Minutes below...