US Fed Meeting Minutes: Officials signal caution on interest rate amid inflation concerns

US Federal Reserve officials remain cautious about adjusting interest rates, emphasizing the need for further progress on inflation before making any changes, minutes from the Federal Open Market Committee’s (FOMC) January 28-29 meeting showed, according to a Bloomberg report.

“Participants indicated that, provided the economy remained near maximum employment, they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate,” the FOMC meeting minutes showed.

The minutes highlighted that “many participants noted that the committee could hold the policy rate at a restrictive level if the economy remained strong and inflation remained elevated.”

At the January meeting, US Federal Reserve officials opted to maintain the benchmark policy rate within the 4.25%-4.5% range.

The minutes underscore the Fed’s measured approach following a cumulative one-percentage-point reduction in interest rates during the final months of 2024. Several policymakers have reiterated their preference to see inflation ease closer to the Fed’s 2% target before endorsing further rate cuts, Bloomberg reported.

Market expectations currently price in one rate cut in 2025, with a potential second cut under consideration, according to futures market data.

Trump Uncertainties

Federal Reserve policymakers are also closely monitoring the potential economic implications of President Donald Trump’s proposed policy measures. While characterizing economic risks as broadly balanced, officials “generally pointed to upside risks to the inflation outlook,” the minutes stated.

“Participants cited the possible effects of potential changes in trade and immigration policy, the potential for geopolitical developments to disrupt supply chains, or stronger-than-expected household spending,” the minutes showed.

Despite these risks, officials expressed confidence that, “under appropriate monetary policy,” inflation would continue to trend toward the 2% target over time.

Additionally, some policymakers highlighted potential challenges in accurately interpreting inflation data at the start of the year due to seasonal distortions, noting that such factors could complicate the assessment of underlying inflation trends.

(With inputs from Bloomberg)