Slower pace ahead for rate cuts

Federal Reserve officials at their December meeting expressed his concern about inflation and the impact that the president-elect Donald TrumpCurrent policymakers could have, indicating that they will move more slowly on interest rate cuts due to uncertainty, the minutes published on Wednesday showed.

Without calling Trump by name, the summary of the meeting featured at least four mentions about the impact that changes in immigration and trade policy could have on the US economy.

Since Trump’s November election victory, he has signaled plans for aggressive and punitive tariffs on China, Mexico and Canada, as well as other US trading partners. In addition, he intends to pursue further deregulation and mass deportations.

However, the extent of what Trump’s actions will be and specifically how they will be directed creates a band of ambiguity about what lies ahead, which members of the Federal Open Market Committee said would require caution.

“Almost all participants judged that risks to inflation have increased,” the minutes say. “As reasons for this judgment, participants cited recent stronger-than-expert readings on inflation and the likely effects of potential changes in trade and immigration policy.”

FOMC members voted to lower the central bank’s benchmark lending rate to a target range of 4.25%-4.5%.

However, they also reduced their outlook for cuts expected in 2025 to two from four in the previous estimate to The September meetingassuming quarter-point increments. The Fed has cut the funds rate a whole point since September, and current market prices it only indicates one or two lower moves this year.

The minutes indicate that the pace of forward cuts is indeed likely to be slower.

“Discussing the outlook for monetary policy, participants indicated that the Committee was at or near the point where it would be appropriate to slow the pace of policy easing,” the document said.

In addition, the members agreed that “the policy rate was now significantly closer to its neutral value than when the Committee began to implement the policy in September. In addition, many participants suggested that a variety of factors underlie the need for an approach watch out for monetary policy decisions in the coming quarters.”

These conditions included inflation readings that remained above the Fed’s 2% annual target, a solid pace of consumer spending, a stable labor market and otherwise strong economic activity in which gross domestic product had grown. at an upward trend clip through 2024.

“Most participants observed that, at the current time, with its policy stance still significantly restrictive, the Committee was well positioned to take time to assess the evolving outlook for economic activity and inflation , including the responses of the economy to the previous policy of the Committee, “said the minute.

Officials stressed that future policy moves will depend on how the data develops and are not on a set schedule. The Fed’s preferred gauge showed Core inflation is 2.4% rate in November, and 2.8% when including food and energy prices, compared to the previous year. The Fed’s inflation target at 2%.

In the documents distributed at the meeting, most of the officials indicated that while they see serious inflation up to 2%, they do not expect it to happen until 2027 and expect that the risks in the short term are at l ‘turn up.

To his press conference after the tariff decision of December 18, president Jerome Powell he compared the situation to “driving on a foggy night or walking through a dark room full of furniture. Just slow down.”

That statement reflected that mindset of meeting participants, many of whom “observed that the current high degree of uncertainty made it appropriate for the Committee to take a gradual approach as it moved toward a neutral policy position,” the minutes said.

The “dot plot” of individual members’ expectations showed they expect two more rate cuts in 2026 and possibly another or two after that, ultimately bringing the long-term fed funds rate up to 3%.