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Federal Reserve officials noted that the US central bank will have to take a “cautious approach” in cutting interest rates further due to the growing risk that inflation will remain persistently above its 2 percent target.
In the minutes of the Fed's December meeting released on Wednesday, officials noted rising policy uncertainty as Donald Trump's second presidency begins, and noted that the pace of the economy… an average The reductions can start to slow or even stop.
“Participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of policy relaxation,” the minutes said.
“Most participants noted that with the monetary policy stance now significantly less restrictive, the Committee could take a cautious approach in considering adjustments to the monetary policy stance,” the minutes said.
In December, Federal Reserve Bank The bank cut its key interest rate by a quarter of a percentage point to 4.25-4.5 percent, a full point lower than it was in September. But officials expect there will be only two additional cuts in 2025, and the US central bank may pause the cycle of interest rate cuts at its meeting later this month.
Fed officials' warning about future interest rate cuts is driven by caution about U.S. inflation expectations, in light of concern among economists that Trump's plan for tariffs, tax cuts and immigration could accelerate price rises again.
According to the minutes, Fed officials believed that “the likelihood that higher inflation may be more persistent has increased” — a key risk to the outlook.
“Participants expected inflation to continue to move towards 2 percent, although they noted that recent higher-than-expected inflation readings, and the effects of potential changes in trade and immigration policy, suggest that the process may take longer than previously expected.” “, stated in the record.
However, some officials indicated that they still expect US monetary policy to ease somewhat aggressively, and dismissed concerns about the impact of tariffs.
“I would support continuing to cut interest rates in 2025,” Fed Governor Christopher Waller said in remarks to the Organization for Economic Co-operation and Development in Paris on Wednesday, adding that he did not expect the tariffs to have a “significant or persistent” impact on inflation. .
“The extent of further easing will depend on what the data tells us about progress toward 2 percent inflation, but my final message is that I think further cuts will be appropriate,” he said, referring to the Fed’s inflation target.
US government bond markets witnessed little change after the release of the minutes, with the two-year Treasury bond yield stable at 4.29 percent, and the 10-year benchmark yield rising 0.01 percentage point to 4.7 percent.
In stock markets, the Standard & Poor's 500 index closed up 0.2 percent. After Wednesday's minutes, investors were betting that the central bank would deliver its first quarter-point rate cut by July, in line with pricing earlier in the day.
