New Delhi [India] January 9 : Federal Reserve officials expressed concern about inflation and advocated a slowdown in rate cuts in their December 17-18 meeting, according to minutes of the meeting.
Fed officials were also worried about the new President Donald Trump's policies ahead and how it will impact their efforts to check inflation.
The minutes of the meeting, which were released on Wednesday, showed that the policymakers said they would move more slowly on interest rate cuts due to the uncertainty.
"Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 per cent" said the minutes.
The minutes included various mentions about the impact that changes in trade policy could have on the U.S. economy.
President-elect Donald Trump has indicated plans for punitive and aggressive tariffs on China and other trading partners of U.S. He has also spoken about more deregulation and mass deportations. Federal committee members indicated caution, on policies ahead.
Federal Reserve members voted in favour of lowering the central bank's benchmark borrowing rate to the target range of 4.25-4.5 per cent.
However, the minutes of the meeting indicated that the pace of cuts ahead is likely to be slower.
"Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2 per cent," said the minutes.
Members were concerned about inflation readings that remain above the Fed's 2% annual target. However, Increased consumer spending, stable labour market and strong economic activity during 2024 gives a positive indication for increased GDP.
"Many participants suggested that it would be appropriate to begin in-depth discussions of balance sheet issues at the Committee's next meeting to guide an eventual decision to slow the pace of runoff" said the minutes.
Officials indicated that future policy moves will depend on how the data unfolds and are not on a set schedule. Most officials indicated based on the documents that while they see inflation gravitating down to 2 per cent, they don't forecast that happening until 2027 and expect that near-term risks are to the upside.
Members showed that they anticipate two more rate cuts in 2026 and maybe another one or two after that, finally taking the rate down to 3 per cent.
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