“Several participants observed that high-income households were increasingly doing better, economically, than lower-income households.”

That’s a real quote from the September FOMC minutes, released on Wednesday afternoon in the US. And it’s the sort of insight you can expect from a gathering of America’s top economists and their leader, a lawyer by training, an investment banker by trade and a last bulwark against authoritarianism by accident.

Sarcastic derision aside, the account of last month’s policy meeting had the potential to provide traders with some insight into a split Committee’s thinking around the relative wisdom of cutting rates with underlying inflation still running well above target and risk assets trading on what many contend are bubble-like valuations. In addition, market participants were keen for any clues as to whether the Fed’s concerned about bank reserves, which slipped below $3 trillion this week.

Jerome Powell characterized last month’s rate cut as a “risk management” exercise, a description that was somewhat difficult to reconcile with a median dot that (narrowly) tipped another 50bps of easing over the balance of the year. I suppose those likely cuts could be considered part of the same “risk management” strategy, but three cuts at three meetings looks suspiciously like an easing cycle, not an “adjustment.”

Not surprisingly, the minutes indicated policymakers are concerned about the labor market, and “viewed downside risks to employment as having increased over the inter-meeting period.” “Low hiring and firing rates are evidence of less dynamism,” job gains are “concentrated in a small number of sectors” and jobless rates for “groups that have historically shown greater sensitivity to cyclical changes in economic activity” — i.e., African Americans and young people — are rising, the minutes said.

As for inflation, participants conceded that price growth had “risen recently.” A “majority” emphasized “upside risks” to their price growth outlook, given “continued uncertainty about the effects of tariffs, the possibility that elevated inflation proves to be more persistent than currently expected even after the inflation effects of this year’s tariff increases fade [and/or] the possibility of longer-term inflation expectations moving up after a long period of elevated inflation readings.”

Notably, not everyone was convinced that a cut was necessary. Although “most participants” said it was time to resume the trek down to neutral in light of “risks to employment,” “a few participants” said it’d make sense to “keep the federal funds rate unchanged” and indicated they would’ve “supported such a decision.”

That must’ve irritated Chris Waller and it suggests Stephen Miran — who of course dissented in favor of a half-point cut — was completely at odds with at least three FOMC members. We already knew that from the dots, but it’s somewhat amusing to see it spelled out.

Although “most” policymakers present at the meeting said it’d likely be appropriate “to ease policy further over the remainder of this year,” “some” pointed to loose financial conditions in suggesting that monetary policy “may not be particularly restrictive, which they judged as warranting a cautious approach in the consideration of future policy changes.”

The figure above’s a reminder: On the Chicago Fed’s measure, financial conditions in the US are quite easy. And using the NY Fed’s DSGE model, policy’s not only not restrictive, it’s already stimulative and set to become more so in the presence of additional rate cuts in 2025. (That’d be “gas on the fire” for the stock bubble.)

The minutes included a paragraph lamenting the fact that the Fed’s goals are currently “in tension,” as Powell’s fond of putting it, which is just a polite way of saying the US economy’s at risk of succumbing to mild stagflation. “Against this backdrop, participants stressed the importance of taking a balanced approach,” the account of the meeting said.

As for reserves, we’re getting close, so to speak, but the Committee’s not ready to make the call yet. “A few participants stated that balance sheet reduction had proceeded smoothly thus far and that various indicators pointed to reserves remaining abundant,” the minutes said. “Nevertheless, with reserves declining and expected to decline further, they noted that it was important to continue to monitor money market conditions closely and evaluate how close reserves were to their ample level.”