Federal Reserve Rate Cuts

Federal Reserve policymakers are inclined to slow the pace of rate cuts due to concerns about stalling disinflation, according to the minutes from the Dec. 17-18 meeting released Wednesday.

After this meeting, the minutes indicated that the Committee would likely slow the pace of future monetary policy adjustments. The cautious sentiment among Fed members is attributed to the slower progress in reducing inflation towards the 2% target.

Participants noted that the overall pace of disinflation had slowed over 2024, with some recent monthly price readings being higher than expected. Furthermore, several members observed that the disinflationary process might have temporarily stalled or presented risks of doing so.

At the end of its December meeting, the Federal Open Market Committee (FOMC) cut its benchmark rate to a range of 4.25% to 4.5%. The decision to support a rate cut appeared closely contested, with one member voting against it, while most participants described their judgments as finely balanced regarding the appropriate action.

December’s cut, marking the third consecutive cut, was viewed as a hawkish measure, with the Fed members signaling fewer rate cuts anticipated for the next year. The summary of economic projections associated with this decision suggested it would take longer for inflation to return to 2%, with a projection of only two cuts this year instead of four.

Since the meeting, economic data, including the recent ISM services survey released Tuesday, indicated fresh price pressures, igniting concerns over a shallower rate cut cycle. Fed Governor Christopher Waller alleviated some fears that rate cuts were entirely off the table this year, expressing optimism that inflation would continue to slow, enabling the Fed to maintain its rate-cut trajectory.

Traders currently anticipate the Fed to remain on pause until June, as indicated by Investing.com’s Fed Rate Monitor Tool.