Last month, the Federal Reserve cut interest rates by 50 basis points. The minutes of this meeting will be released early Thursday morning Beijing time, which may ultimately reveal how much divergence there is among decision-makers on this decision that has surprised many economists. This is because at this meeting, one director expressed opposition, the first time in 19 years.

Federal Reserve Chairman Powell stated at the post-meeting press conference that support for a 50 basis point rate cut is "broad." Even dissenting director Bowman agreed that it was time to ease monetary policy, but she preferred to start with a smaller 25 basis point rate cut to guard against what she sees as lingering inflation risks.

However, Powell also acknowledged that the "discussion around this decision was very diverse," and Federal Reserve policymakers have widely varying forecasts for what will happen over the next three months.

In the dot plot released at the Federal Reserve's September meeting, policymakers expect rates to fall further by 0 to 75 basis points by the end of the year. This difference matches the Fed's forecast from September 2022, when officials were still raising rates and debating how much was needed to contain inflation. Such a difference had not occurred until then, not until September 2016.

The minutes of Federal Reserve meetings detail the back-and-forth communication between policymakers and staff during the two-day meetings. These minutes include sections on the economic and financial outlook, officials' views on appropriate monetary policy, and the risks they believe the economy faces.

While this document is lagging, usually released three weeks after each Federal Reserve meeting, it also better clarifies the opinion divergences in each policy vote to the public and investors. This may also provide clues on how the Fed might respond to upcoming economic data.

Economists at Citigroup wrote on Monday that these minutes could "reveal officials' faster threshold for cutting policy rates."

Investors currently expect the Fed to cut the benchmark interest rate by another 25 basis points at the meeting on November 6-7, and to cut it by another 25 basis points in December.

The document may also more clearly indicate whether a 50 basis point rate cut is a difficult decision for its supporters. Although only one member dissented, this does not indicate the views of the seven non-voting participants at the meeting on this measure, nor does it indicate how the voters view their choices.

This year's voters, Richmond Fed President Barkin, said in an interview last week that he supports a 50 basis point rate cut, but he is also open to a smaller cut and does not see a significant difference in the two rate cut approaches in terms of the macroeconomy. He pointed out that starting with a larger rate cut is consistent with the policy path proposed by almost all 19 Fed officials.

For example, nine officials expect that four 25 basis point rate cuts throughout 2024 would be appropriate, while another seven officials expect only three.

Barkin said: 'If you're ultimately going to get down to this range... a 50 basis point cut is reasonable. A 25 basis point cut is also reasonable. I can fully accept a vote supporting a 50 basis point rate cut.'

Powell and other officials pointed out that the Fed can adjust the pace and magnitude of rate cuts based on the development of the economy and inflation.

The employment report released last Friday has reinforced investors' belief that the Fed will reduce the rate cut magnitude to 25 basis points at the meeting on November 6-7. The report showed that non-farm payrolls increased more than expected, the unemployment rate dropped, and the wage growth rate was 4%, still higher than the level decision makers consider consistent with their 2% inflation target.

The latest inflation data to be released this Thursday will be the latest key data point in this debate. As long as there is evidence that price pressures continue to ease, decision makers are generally willing to continue cutting rates.

Editor/new