Analysis: If labor data disappoints again, Powell may have another chance to persuade his colleagues to support a 50 basis point rate cut

BlockBeats reports that on September 26, when the Federal Reserve made its decision on September 18, forecasts showed that the vast majority of officials favored a reduction in the benchmark interest rate by at least one percentage point or more this year. This suggests there will be at least one significant rate cut. However, quite a few people believe only 75 basis points are needed, indicating support for three smaller cuts.

In the end though, among the twelve voting members of the Federal Open Market Committee (FOMC), all but one supported Jerome Powell's move to cut rates by 50 basis points. This was a key victory for Powell as he is trying to prolong an economic expansion many have predicted has already ended. The lone dissenting Fed governor Bowman called for a more restrained pace of cuts to avoid undermining progress on inflation.

Economists say if the economy starts to slide, another 50-basis-point cut cannot be ruled out because as long as inflation cools down, Powell would prioritize keeping employment levels close to full capacity. If labor market data disappoints again, Powell may get another chance in coming months to sway his colleagues towards cutting rates by another 50 basis points. Some officials indicated in recent speeches they would likely support further cuts of 25 basis points but also left open door for larger reductions.