The Fed released the minutes of its September FOMC monetary policy meeting at 2 p.m. Wednesday, Oct. 9. The minutes show Fed officials' concerns about the rising risks to the US economic outlook and discuss in detail the differences within the committee over the future path of interest rates.

The minutes show that officials at the meeting generally believe that the outlook for the US economy is basically optimistic, and their views on economic activity and inflation have barely changed since the July meeting, but most officials (most) agree that the outlook is based on a looser policy path to some extent.

Increased downside risks to the US economy, which may eventually affect consumer spending

According to Sina Finance and Economics:

The minutes were devoted to a lengthy record of the participants' concerns about the economic outlook. For example, they are "generally beginning" to pay more attention to the risks posed by adverse developments in trade, geopolitics and the global economy. Coupled with the continued weakening of inflationary pressures in the United States, many officials (many) expect real GDP growth in the United States to slow to near its potential growth rate in the second half of the year.

Officials believe that international trade and overseas economic development seem more likely to have a significant negative impact on the US economy; weak business investment and manufacturing so far this year also suggest that US economic growth is likely to be more "significantly slower" than the Fed had expected.

Officials at the meeting believe that external risks such as trade and the global economic outlook are the main factors affecting U. S. business investment, exports and manufacturing. They "generally believe" that downside risks to the outlook for US economic activity have increased since the July meeting, showing a clearer picture of long-term weakness in investment spending, manufacturing production and exports.

Some officials (several) believe that these increased downside risks could slow hiring and eventually affect consumer spending, income growth and the overall economic outlook in the United States. Some officials (several) also believe that the statistical model used to measure the medium-term recession shows that the possibility of recession has increased significantly in recent months.

In addition, several attendees (a number of) noted that the revised previous values of US non-farm payrolls data could show signs of weaker momentum in US employment growth this year, and some officials (a few) urged the committee to remain vigilant to monitor "any sign of weakness in the labour market". Recent economic indicators also suggest that industrial activity is unlikely to improve or pick up significantly in the near future.

Some analysts pointed out that Federal Reserve Chairman Powell made many speeches this week and this minute did not explicitly overturn the market's expectations of further interest rate cuts. As a result, after the release of the minutes, the Fed Watch tool of CME, the Chicago Mercantile Exchange, showed that the probability that FOMC was expected to cut interest rates by 25 basis points on October 30 remained at a high of nearly 83 per cent, little changed from 80.7 per cent before the announcement and a day earlier.

The Fed is deeply divided on whether to cut interest rates in September and has different views on inflation.

The meeting also recorded in more detail the differences among Fed officials over the path of interest rates.

The minutes show that most of the participants (most) believed that a 25 basis point cut in September was appropriate, citing reasons such as the economic outlook, risk management and the need to anchor inflation and inflation expectations at the 2 per cent target.

But some officials (several) prefer to keep interest rates "on hold" in September on the grounds that baseline forecasts for the economy have remained largely unchanged since the July meeting, and that the current state and outlook of the economy cannot justify a looser monetary policy stance, which was loose enough before September. As a result, several officials (a couple of) believe that if interest rates continue to be cut in September, they may have taken excessive insurance measures against potential risks, and if these shocks become a reality, it will give the Fed less policy room to respond, while others worry that interest rate cuts will lead to financial imbalances.

A number of other officials (a couple of) supported a 50 basis point cut in September on the grounds that more aggressive rate cuts would reduce downside risks and respond to recent economic signals such as slowing job growth, weaker business investment and continued weak market-based inflation compensation. Several officials (several) believe that because of the lag in monetary policy, "now is the right time" to provide the necessary policy conditions to support economic activity in the coming quarters.

In addition, there are different views on US inflation. Several officials (some) continue to believe that the risks to the inflation outlook are on the downside, citing the global economic downturn, expected downside risks to the US economic outlook, and real inflationary pressures that continue to be under pressure. Several other officials (some) believe that the expected inflation data are consistent with previous estimates, that is, the weakness at the beginning of the year is mostly temporary.

In the September FOMC, Eric Rosengren, chairman of the Boston Fed, and Esther George, chairman of the Kansas City Fed, voted against it as they did in July, saying there was no need to cut interest rates. St. Louis Fed Chairman James Bullard, known as the "big dove", also voted against it, supporting a 50 basis point cut in interest rates in September, the most divisive meeting of the Fed's FOMC decision since December 2014.

There is no preset path for the policy, and the market's high expectations of interest rate cuts cause "discomfort".

The only consensus Fed officials seem to have on the future path of monetary policy is that there is no preset path and decisions will be made based on the latest information on the economic outlook.

According to the minutes, several officials (a few) believe that financial futures prices suggest that market expectations of Fed easing are excessive, exceeding the number of interest rate cuts that monetary policy makers themselves are willing to implement, and that they are "uncomfortable" with the gap; the FOMC committee may need to seek "better alignment" between market interest rate expectations and central bankers' expectations.

Other analysts said discussions among Fed officials about when to stop easing surfaced in the September minutes. Some participants (several) suggested that the post-FOMC statement should provide more clarity about "when safeguard policy adjustments in response to uncertainty will end". Of course, the statement of the September FOMC meeting did not reflect these demands.

At present, the market generally expects that if the Fed cuts interest rates by 25 basis points as scheduled in October, there will be two or so interest rate cuts by the end of 2020, which is inconsistent with the "bitmap" of interest rates of Fed officials updated in September.

In the "bitmap", seven of the 17 officials who provided forecasts expect to cut interest rates again by the end of this year, reducing the target range of the federal funds rate to 1.5%, 1.75%. The opinion belongs to the "minority". Five other officials supported not to cut interest rates this year after the rate cut in September, while five preferred a higher interest rate target range in July. The Fed does not expect further interest rate cuts in 2020, but some officials expect interest rates to rise again as soon as 2020.

Officials agreed to discuss the reserve size quickly, and the expansion of the table should not be confused with QE

In addition, Fed officials discussed the turmoil in money markets in September. Officials."agree."The Fed should quickly discuss a reasonable amount of bank reserves. A few officials mentioned the possibility of resuming table expansion, and several several officials suggested the establishment of a standing repo mechanism (SRF) as a more permanent solution to the shortage of funds in the overnight financing market.

It is worth noting that both the minutes and Powell, chairman of the Federal Reserve, stressed that the "organic growth" of the Fed's balance sheet to manage the size of reserves should not be confused with the QE quantitative easing stimulus in the wake of the financial crisis. Mr Powell said on Tuesday that the Fed would soon announce a number of measures to "increase bank reserves over time", such as options such as buying short-term T-Bills, but only to address "recent technical issues" and not to materially influence monetary policy positions.

After the release of the Fed minutes, the reaction of the financial markets was relatively muted.

The short-term gains of the three major indexes of US stocks narrowed, while the dollar index rose slightly in the short term and held steady. Spot gold fell more than $2 to $1504.75 / oz, then fully recovered the decline, and the intraday gain expanded again to 0.2%, above $1508.

Yields on two-year Treasuries, which are more sensitive to policy rates, rose more than 1 basis point in the short term to 1.47 per cent. The benchmark 10-year yield fell nearly 1 basis point to 1.58 per cent in the short term. International oil prices fell together. Brent crude fell nearly $1.20 from the day's high, down 0.1% on the day, pushing down an integer of $58 per barrel. WTI crude oil was at $52.53, down 0.21% on the day, after rising more than 2% on the day.