Federal Reserve policymakers can’t seem to agree on when they’ll cut borrowing costs again. Most say further cuts could happen if prices keep cooling, but several officials think rates need to stay put for a while. That’s according to meeting records released Tuesday.
The minutes from the Fed’s December 9-10 gathering showed ongoing disagreements among central bank leaders. While the majority backed another rate reduction last month, the decision wasn’t easy for everyone.
The Fed voted 9-3 to trim its key rate by a quarter point in December. That’s the third cut in a row, bringing the rate down to between 3.5% and 3.75% as previously reported by Cryptopolitan.
“A few of those who supported lowering the policy rate at this meeting indicated that the decision was finely balanced or that they could have supported keeping the target range unchanged,” the minutes stated.
Officials adjusted their statement after the meeting in a way that showed less certainty about the timing for future cuts. Their median forecast had just one quarter-point reduction coming in 2026, though individual predictions were all over the map. Market watchers are betting on at least two cuts next year.
The vote exposed clear rifts
Governor Stephen Miran broke ranks by pushing for a bigger half-point cut. Meanwhile, Austan Goolsbee from the Chicago Fed and Jeff Schmid from Kansas City voted against any reduction. They wanted to leave rates alone.
Things got messier when looking at rate forecasts for 2025. Six out of 19 policymakers showed their opposition to December’s cut by saying rates should end this year at 3.75% to 4%. That’s exactly where they stood before the meeting.
Central bankers are dealing with competing worries about inflation versus jobs. Most officials noted that moving toward lower rates would help prevent serious damage to the job market, according to the minutes.
But others had concerns about prices. Several officials warned that cutting rates while inflation stays high could send the wrong message. People might think the Fed isn’t serious about reaching its 2% inflation target.
Fed Chair Jerome Powell told reporters after the meeting that officials had cut rates enough to protect jobs while keeping them high enough to control prices.
Making decisions proved harder than usual because policymakers didn’t have the typical economic data. A government shutdown ran through October and nearly half of November, which meant less information was available. Officials noted that data coming in over the next few weeks would help guide their choices.
The minutes said some officials who wanted to hold rates steady thought the large amount of job and inflation data coming before the next meeting would be “helpful in making judgments on whether a rate reduction was warranted.”
New information since December hasn’t settled the debate
Unemployment climbed to 4.6% in November, the highest since 2021. Consumer prices rose less than forecasters expected. Both figures support the case for lower rates.
But there’s a catch. The economy expanded at a 4.3% annual pace in the third quarter, the strongest growth in two years. That probably reinforced concerns among officials worried about inflation.
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Source: https://www.cryptopolitan.com/fed-minutes-expose-cracks-in-policymaker-unit/
