The Federal Reserve’s decision to cut interest rates was narrowly decided upon, with minutes from its December meeting revealing that policymakers were on uncertain footing due to stubborn inflation and potential tariffs. The rate cut, which occurred last month, may be the only one for 2025, according to economic projections.
Federal Reserve officials cut interest rates as expected in December, but the decision was not unanimous. Beth Hammack, the president of the Federal Reserve Bank of Cleveland, voted against the rate cut, while a summary of members’ economic projections suggested that three nonvoting Fed officials would have preferred to leave rates unchanged.
The minutes show that most policymakers still expect interest rates to be lowered in the future, but they are no longer certain that rates can effectively slow down the economy. The concern is that inflation is losing momentum and that the labor market is starting to show cracks.
Additionally, President-elect Donald J. Trump’s proposed economic policies, particularly those around trade and immigration, could lead to faster inflation and slower growth. However, some policymakers believe that Mr. Trump’s proposals will not have a significant impact on inflation.
The Fed is expected to hold interest rates steady at its next meeting, which may be the last rate cut for 2025. Investors are getting the message, with financial markets moving little in response to the minutes. The account of the meeting was largely consistent with investors’ expectations for Fed policy.
The Fed’s decision-making process has become increasingly uncertain due to the complex economic landscape. Policymakers must navigate a delicate balance between slowing down inflation and preventing a slowdown in economic growth. As the Fed waits to see what Mr. Trump will do, policymakers are taking a cautious approach, weighing the risks and benefits of future rate cuts carefully.
Source: https://www.nytimes.com/2025/01/08/business/fed-minutes-rate-cuts-inflation.html