Interest Rate Cuts on Hold Until Inflation Improves, Fed Minutes Show

The Federal Reserve pressed pause on interest rate cuts last month. The minutes from its January meeting suggest the hiatus is likely to be a long one.

A record of the central bank’s Jan. 28-29 meeting, released on Wednesday, showed that officials have not written off rate cuts completely, and they still expect to lower borrowing costs over time. But slow progress on taming inflation, combined with significant uncertainty about how President Trump’s economic agenda will shape up, has solidified their position that the best course of action for now is to stand pat until they have more clarity on the economic outlook.

So long as the labor market stayed solid, officials had concluded that “they would want to see further progress on inflation before making additional adjustments to the target range for the federal funds rate,” the minutes said. A majority also endorsed a “careful approach” to further monetary policy decisions in light of what they described as “the current high degree of uncertainty.”

Officials convened for their most recent meeting just days after Mr. Trump returned to the White House with a pledge not only to redirect global trade relations and immigration flows but also to bolster businesses through tax cuts and deregulation.

So far, the president has followed through on some of these promises, especially in regard to tariffs. His administration has raised levies on China, announced reciprocal tariffs on trading partners with policies Mr. Trump deems “unfair” and threatened 25 percent charges on automobile, semiconductor and pharmaceutical imports. These measures come on the heels of 25 percent duties on steel and aluminum.

The minutes from the January meeting showed that officials were wary about the potential economic impact of the tariffs, as well as policies related to mass deportations, another cornerstone of Mr. Trump’s plans. Both were cited as “having the potential to hinder the disinflation process,” according to the minutes.