WASHINGTON: Most US Federal Reserve policymakers view further interest rate cuts as appropriate if inflation cools over time, minutes of their latest gathering showed on Tuesday.
But some officials also suggested that it would probably be appropriate to keep rates “unchanged for some time” after the latest reduction in December.
Officials voted 9-3 to lower rates by a quarter percentage point this month, bringing levels to a range between 3.50 per cent and 3.75 per cent.
But a few who supported this third consecutive cut indicated that their decision was “finely balanced” or that they could have instead backed keeping rates unchanged.
The Fed’s meeting minutes highlight the tightrope that officials walk as they balance the need to shore up a weakening labor market against risks of inflation becoming entrenched.
Policymakers have been split over the pace of rate cuts, with lower rates serving to boost the economy while higher levels are aimed at tamping down inflation as President Donald Trump‘s tariffs bite.
In December, Chicago Fed president Austan Goolsbee joined Kansas City Fed president Jeffrey Schmid to support keeping rates unchanged. Fed Governor Stephen Miran also dissented — favoring a bigger, half-point reduction.
While officials also penciled in one more cut in 2026, Fed Chair Jerome Powell hinted that the central bank could hold off on doing so in the coming months.
For now, the Fed’s minutes showed that officials expect inflation to be “somewhat elevated in the near term” before moving gradually to their two-per cent target.
But even as many anticipate that the effects of tariffs on underlying goods inflation would wane, some were wary about “when these effects would diminish or the extent to which tariffs would ultimately be passed through to final goods prices.”
Some flagged risks that elevated inflation might prove more stubborn than expected.
Meanwhile, most policymakers gauged that recent indicators signaled a continued cooldown in employment. But their outlook remained uncertain amid delays in government data releases after a record-long shutdown.
Policymakers also noted that lower-income households were especially worried about their employment prospects.
They saw stronger spending growth among higher-income households, while those who made less money have adjusted their spending due to an “outsized cumulative increase in the prices of basic goods and services over the past several years.”
The Fed’s rate-setting committee has 12 voting members who take a majority vote in deciding on rates.
© New Straits Times Press (M) Bhd
