US Fed officials expect slow rate cuts in 2025, December minutes say inflation news
Minutes of the December meeting show differences of opinion on the decision to cut rates and that the 0.25 per cent cut was a ‘close call’.
United States Federal Reserve officials are expected to slow the pace of interest rate cuts this year at their meeting on December 17-18 in view of persistently elevated inflation and the threat of broader tariffs and other potential policy changes.
The minutes of the meeting, released Wednesday after a three-week hiatus, also showed a clear division among the Fed’s 19 policymakers. Some expressed support for keeping the central bank’s key rate unchanged, as stated in the minutes. And most executives said the decision to cut rates was a close call.
Ultimately, the Fed decided to cut its key rate by a quarter point to about 4.3 percent. One official, Cleveland Fed President Beth Hammack, dissented in favor of keeping rates unchanged.
Still, there was broad consensus that after lowering rates for three consecutive meetings, it was time for more discussions on their key rate.
The lower rate cut will mean that the cost of borrowing money – including for homes, cars and credit cards – for consumers and businesses will remain high this year.
Policymakers said the Fed was “at or near the point where it would be appropriate to slow the pace of policy easing,” the minutes said. In projections released after the meeting, Fed officials said they expected only two cuts next year, down from an earlier estimate of four cuts.
trump tariffs
The minutes also revealed that “almost all” Fed policymakers see a greater risk than before that inflation may remain higher than they expect, partly because inflation has remained elevated in many recent readings and “trade and because of the potential effects of potential changes in immigration policy.
The Fed’s staff economists considered the future path of the economy particularly uncertain at their December meeting, in part due to “potential changes in trade, immigration, fiscal and regulatory policies” of incoming President-elect Donald Trump’s administration, which could Regarding this, the employees said that it is difficult to assess. In terms of how they will impact the economy. As a result, he included several different scenarios for the future path of the economy in his presentation to policymakers.
The staff projected that inflation this year would be about the same as in 2024 as they expected Trump’s proposed tariffs to keep inflation high.
Stock markets fell last month after Fed officials lowered the chances of a rate cut. Fed Chairman Jerome Powell said at a press conference after the meeting that the decision to cut rates was a “close decision.”
Powell also said recent signs of stubborn inflation have caused many Fed officials to reduce their expectations for a rate cut. According to the Fed’s preferred measure, inflation rose to 2.4 percent in November from a year earlier, above the Fed’s 2 percent target. Excluding volatile food and energy categories, it was 2.8 percent.
Additionally, some officials have begun to consider the potential impact of Trump’s proposals, such as sweeping tariffs, on the economy and inflation next year.
For example, Goldman Sachs economists have estimated that Trump’s tariff proposals could increase inflation by about half a percentage point later this year.
Earlier on Wednesday, Fed Governor Christopher Waller said he still supports a rate cut this year, partly because he expects inflation to consistently fall below the Fed target. He also said he did not expect the tariffs to increase inflation and that his priority of reducing borrowing costs would not change.
In the question-and-answer session, Waller also said he did not think Trump would ultimately implement the universal tariffs he promised on the campaign.
