Federal Reserve Officers at theirs the December meeting expressed concern about inflation and the influence of the President-elect Donald Trumppolicymakers may have to, indicating they would move more slowly on interest rate cuts because of the uncertainty, summaries released Wednesday showed.
Without calling Trump by name, there were at least four references to the possible impact of changes in immigration and trade policy on the US economy in the summary of the meeting.
Since Trump won election in November, he has revealed plans for aggressive, punitive tariffs on China, Mexico and Canada as well as other US trading partners. In addition, he plans to continue with more deregulation and mass exports.
However, the extent of Trump's actions and especially how they will be directed creates a band of uncertainty about what lies ahead, which members of the Federal Open Market Committee said needed to be cautious.
“Almost all participants believed that upside risks to the inflation outlook had increased,” the minutes said. “As reasons for this assessment, participants cited on stronger-than-expected readings on inflation and the possible effects of possible 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 lowered the forecast for expected cuts in 2025 to two from four in the previous estimate at the September meetingassuming a quarter-point increase. The Fed cut a full point off the treasury rate from September, and current market prices indicating only one or two more moves lower this year.
Minutes indicated that the pace of cuts ahead is likely to be slower.
“In discussing the outlook for monetary policy, participants said the Committee was at or near the point where it would be appropriate to slow the pace of policy easing,” said the document.
In addition, members agreed that “the policy rate was now much closer to its neutral value than when the Committee began policy easing in September. In addition, many participants suggested that several factors reinforced the need for a careful approach to monetary policy decisions over time. coming quarters.”
These conditions include inflation readings that remain above the Fed's 2% annual target, a strong pace of consumer spending, a stable labor market and otherwise strong economic activity where gross domestic product was to grow at a higher than normal rate through 2024.
“A large majority of participants noted that at this stage, with its policy position still meaningfully limited, the Committee was well placed to take time to assess the – an evolving outlook for economic activity and inflation, including the economy's responses to earlier Committee policy. activities,” the minutes said.
Officials emphasized that future policy moves will depend on how the data expands and are not on a fixed schedule. The best gauge showed the Deer headline inflation running at 2.4% level in November, and 2.8% when including food and energy prices, compared to the previous year. Fed's inflation target at 2%.
In documents released at the meeting, most officials indicated that while they see inflation down to 2%, they do not foresee that happening until 2027 and they expect near-term risks to be on the upside.
At his press conference after rate decision December 18, Chairman Jerome Powell compare the situation to “driving on a foggy night or walking into a dark room full of furniture. You're just slowing down.”
That statement reflected the mindset of meeting participants, many of whom “felt that the current high level of uncertainty made it appropriate for the Committee to work gradually as she transitioned to a neutral policy position,” the minutes said.
The “dot plot” of individual members' expectations indicated that they expect two more rate cuts in 2026 and possibly one or two more after that, ultimately bringing the long-term funds rate down to 3%.
