The U.S. Federal Reserve made its long-awaited first interest-rate cut on Wednesday.

Meanwhile, minutes from the Bank of Canada’s latest policy meeting showed that leaders have been contemplating an increase as well as a reduction.

The U.S. Federal Open Market Committee slashed the Federal Funds rate by 50 basisp points to a new range of 4.75% to 5%. The first interest-rate cut since March 2020 represented a reversal in strategy for the central bank, which had held its key interest rate at a 23-year high for 14 months prior to Wednesday.

Fed Chair Jerome Powell dismissed concerns that a 50-bps cut increases the risk of an economic downturn.

“I don’t see anything in the economy right now that suggests that the likelihood of a recession, sorry, of a downturn, is elevated,” he told reporters.

“I don’t see that. You see growth at a solid rate. You see inflation coming down. You see a labour market that’s still at very solid levels.”

With inflation approaching the Fed’s target of 2%, policymakers are pivoting away from fighting inflation to the job market. However, the U.S. central bank anticipates only a 50-bps in additional rate cuts for the rest of the year, indicating that the committee does not believe the job market is in imminent danger of collapsing.

“The (Fed) has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance,” the Fed said in a statement. “The economic outlook is uncertain, and the Fed is attentive to the risks of both sides of its dual mandate.”

Not all policymakers agreed with the decision. Governor Michelle Bowman voted against the other 11 members of the committee, preferring a lower 25-bps cut, breaking the FOMC’s streak of unanimous votes for the first time since June 2022.

Prior to the decision, interest-rate futures indicated that there was a greater than 50% possibility of a 50-bps cut rather than the typical 25-bps change. Overall rate-cut estimates have risen since the last FOMC meeting, with 60 bps of cuts added by the end of 2025, with a significant emphasis on 2024.

Prior to the anticipated Fed cut, some Canadian economists said that the reduction could spur the BoC to make a bigger cut following its incremental 25-bps reduction on September 4. But the meeting minutes, released Wednesday, show that Canadian policymakers considered a hike as well as a reduction.

As with the FOMC, some BoC members were divided on the issue.

“Some members took the view that the risks were balanced, with strength in shelter and services price inflation offsetting the downward pressure from excess supply,” the BoC minutes state. “Some had become more concerned with the downside risks to inflation, particularly if the economy and labour market weakened further.”

But Statistics Canada reported recently that inflation hit the BoC’s 2% target rate. The BoC has introduced three consecutive 25-bps cuts this summer.

— With files from Joe Palmisano of Connect Money.

Pictured: U.S. Federal Reserve Chief Jerome Powell

(For more details and reaction to the U.S. Fed’s rate cut, read Joe Palmisano’s Wednesday Evening Brief.