At the September FOMC meeting, “many” Fed officials said the rekindled inflation impulse observed over the first several months of 2024 constituted “a temporary interruption of progress toward 2%.” “Recent” inflation updates, by contrast, are “consistent with inflation returning sustainably” to the Fed’s (mostly arbitrary) definition of price stability.

So, inflation overshoots in Q1 were “transitory,” just to pull a random adjective out of the thesaurus. The inflation readings that count are the last few readings (which is convenient because those are the good ones).

That’s all according to the September FOMC minutes, released on Wednesday afternoon. The sarcastic derision is (mostly) for comedic effect. It’s plainly the case that the last several months have seen a demonstrable slowdown in price pressures, and it’s probably the case that the unwelcome pickup witnessed across Q1 was, in fact, temporary.

That said, the Fed’s surely concerned about a repeat of Q1’s reheat. If they aren’t, they’re derelict or anyway naive. Service sector PMIs strongly suggest price pressures are percolating again across the world’s largest economy, and the September jobs report partially negated the rationale for last month’s 50bps rate cut.

The minutes, which are obviously stale, won’t age well in the event we haven’t seen the last of the inflation scare. “Several” participants voiced a sanguine view about the long odds of wage increases putting additional upward pressure on consumer prices, for example. And “some” participants expected “a more rapid disinflationary trend” to emerge in shelter inflation “fairly soon.”

“Some” participants reiterated that the headline pace of jobs growth as reported by the BLS was beginning to “fall short of what was required to keep the unemployment rate stable,” all else equal. Fed officials have said that publicly on several occasions. It was true until it wasn’t. The three-month moving average for the NFP headline was 116,000 when the Fed met. Now, following the September jobs report (which not only boasted a very robust headline, but also came with upward revisions to the prior two months), the three-month pace is 186,000.

Consistent with Jerome Powell’s Jackson Hole address, “participants” (the minutes didn’t specify how many) agreed that “further [labor market] cooling did not appear to be needed to help bring inflation back to 2%.” Again, that assessment was made without the benefit of the September jobs report and the accompanying upside average hourly earnings print.

As for consumer spending, officials described the US consumption impulse as “resilient.” That was before the BEA revised the income series sharply higher, prompting Powell to assess that said “resilient” spending impulse may well be even more durable than the Fed imagined just a few weeks ago.

Although “almost all” participants said last month that downside risks to employment had probably increased, “a couple” of officials “did not perceive an increased risk of a significant further weakening in labor market conditions.” One of those two was Michelle Bowman, who became the first governor to dissent since 2005.

At the same time, “a couple” of participants “specifically” fretted about the read-through of geopolitical turmoil for inflation. Needless to say, that turmoil has only deepened since the September policy meeting. “Some” participants warned that progress towards 2% could be “stalled” by “a larger-than-anticipated easing in financial conditions,” stronger spending, obstinate housing costs or all three.

On one Fed measure (shown above), financial conditions are the loosest since December of 2021.

As far as support for the 50bps move (versus the 25bps Bowman preferred), the minutes said “a substantial majority” supported the upsized increment. Bowman wasn’t the only official with reservations, though. That much is clear.

“Some” participants preferred a smaller cut given that inflation is “still somewhat elevated” in an environment of generally strong growth and low unemployment. “A few others” said they “could have” voted for 25. “Several” said 25 would give the Committee “time to assess the degree of policy restrictiveness as the economy evolved.” There was no consensus — or very little anyway — about how restrictive current policy settings actually are, even as everyone seemed pretty sure that policy was some measure of restrictive. Write your own jokes.

“Generally,” officials agreed that it was important to emphasize that Fed policy’s not on a preset course and that decisions “are conditional on the evolution of the economy.”

Unless of course the incoming data doesn’t support the additional rate cuts the Committee promised to deliver, in which case “almost all participants” said it would likely be appropriate to “just wing it” because “a promise is a promise.” (I’m kidding. I think.)