US Federal Reserve officials expected slower interest rate cuts in 2025, e.g. December minutes | Inflation news

Minutes from the December meeting show split on the decision to cut interest rates and the 0.25% cut was a “close call.”

US Federal Reserve officials at their meeting on December 17-18 are expected to reduce the pace of interest rate cuts this year in the face of persistent high inflation, the threat of broad tariffs and other potential policy changes.

The minutes of the meeting, released on Wednesday after a typical three-week delay, showed clear division among the Fed’s 19 policymakers. The minutes said that some expressed their support for keeping the central bank’s key interest rate unchanged. The majority of officials said the decision to cut interest rates was a close one.

Ultimately, the Fed chose to do so Lowering the key interest rate by a quarter of a percentage point to about 4.3 percent. One official, Cleveland Fed President Beth Hammack, dissented in favor of keeping interest rates unchanged.

However, there was widespread agreement that after three successive rate cuts, it was time to take a more deliberate approach to the key interest rate.

Lower interest rates are likely to mean that borrowing costs for consumers and businesses – including homes, cars and credit cards – will remain high this year.

Policymakers said the Fed “was at or near the point at which it would be appropriate to slow the pace of policy easing,” the minutes said. In forecasts released after the meeting, Fed officials said they expect only two cuts next year, down from a previous forecast of four cuts.

Trump’s definitions

The minutes also showed that “nearly all” Fed policymakers see a greater risk than before that inflation may remain higher than they expect, partly because inflation has persisted at several recent readings and because of “the potential implications of potential changes in… Trade and migration. policy”.

Fed economists viewed the economy’s future path as particularly uncertain at the December meeting, in part because of President-elect Donald Trump’s administration’s “potential changes to trade, immigration, fiscal, and regulatory policies,” which staff said were difficult to assess. In terms of how it affects the economy. As a result, they included several different scenarios for the future course of the economy in their presentation to policymakers.

Staff expected inflation this year to be about the same as in 2024 because they expected Trump’s proposed tariffs would keep inflation high.

Stock markets fell after Federal Reserve officials lowered their expectations for interest rate cuts last month. Fed Chairman Jerome Powell said in a press conference after the meeting that the decision to cut interest rates was a “close decision.”

Powell also said that recent signs of stubborn inflation have prompted many Fed officials to scale back their expectations for rate cuts. According to the Fed’s preferred measure, inflation rose to 2.4 percent in November, compared with a year ago, which is above the Fed’s target of 2 percent. Excluding the volatile food and energy categories, the percentage was 2.8 percent.

In addition, some officials have begun to study the potential impact of Trump’s proposals, such as broad tariffs, on the economy and inflation next year, the minutes said.

For example, economists at Goldman Sachs estimate that Trump’s tariff proposals could push inflation higher by about half a percentage point later this year.

Earlier Wednesday, Fed Governor Christopher Waller said he still supports interest rate cuts this year, in part because he expects inflation to trend steadily toward the Fed’s target. He also said he did not expect tariffs to worsen inflation and would not change his preference for lower borrowing costs.

In a question-and-answer session, Waller also said he doesn’t believe Trump will eventually impose the global tariffs he promised in his campaign.