By Howard Schneider

WASHINGTON (Reuters) – Federal Reserve officials have been signaling that further interest rate cuts are on hold for now, given slowed progress on inflation and a still-strong U.S. economy. However, minutes from the central bank’s December meeting may indicate how deeply this sentiment is shared among policymakers in an uncertain economic environment under the incoming Trump administration.

After cutting rates by a quarter of a percentage point at the December 17-18 meeting, Fed Chair Jerome Powell noted that some officials had begun approaching upcoming decisions with caution due to uncertainty surrounding President-elect Donald Trump’s tariff, tax, and other proposals.

The minutes, set to be released at 2 p.m. EST (1900 GMT) on Wednesday, may help clarify the Fed’s approach to future rate reductions. Projections issued after December indicated officials expected only a half percentage point of cuts this year, down from one full percentage point in September.

Analysts from Citi anticipate the minutes will reflect a hawkish viewpoint, expressing concerns that inflation could remain elevated unless policy rates stay suitably restrictive, possibly leading to a higher interest rate needed to return inflation to the Fed’s 2% target.

Fed Governor Chris Waller stated that while he predicts more rate cuts this year, their timing is uncertain due to stalled progress on inflation. He emphasized that the pace of cuts will depend on progress with inflation while ensuring a stable labor market.

Since then, the Fed reduced the policy rate by a total of one percentage point over its last three meetings, with the benchmark rate now ranging between 4.25% and 4.5%. Economic data remains steady, with growth above 2% and unemployment in the low 4% range. The Fed’s preferred inflation measure stands at 2.4%.

Fed officials have consistently indicated there’s no rush to cut rates further until there’s clear indication of a shift in data—like a notable drop in employment or inflation levels closer to the 2% target.

Richmond Fed President Thomas Barkin remarked that the Fed should maintain tight credit conditions until there’s real confidence that inflation has stabilizer down to 2% or there’s significant weakening in the economy’s demand side.

New jobs data coming this Friday will reveal how employment and wages changed in December. A labor market survey previously released indicated stability, with a slight increase in job openings but a small decline in hiring and voluntary quits, potentially signaling a weaker hiring environment.

The meeting minutes might also delve into when to stop reducing the central bank’s balance sheet, having cut approximately $2 trillion in bond holdings since the summer of 2022. Expectations are that this quantitative tightening effort will conclude in 2025.