Market News
Fed saw December rate cut as close call with 'some time' before next rate cut - BLOOMBERG
BY Jennifer Schonberger Senior Reporter
Cutting rates in December was a close call for officials at the Federal Reserve, with some suggesting it could be "some time" before the central bank cuts rates again, according to the minutes from the central bank's December policy meeting released Tuesday.
"Most participants judged that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation declined over time as expected," the minutes read.
"With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting."
When it came to cutting rates earlier this month, Fed officials were split.
While most members supported lowering rates at the last meeting on concerns about the job market, some preferred to keep rates unchanged because of concerns that progress toward the Fed's 2% target has stalled.
There were some who could have supported keeping rates unchanged, as officials would be getting a slew of new data that would help inform the decision about whether cutting rates again was needed.
Still, a few thought that lowering rates was not justified because they didn't see significant further weakening in the job market. Data released about a week after the Fed's Dec. 10 decision showed the unemployment rate hit a four-year high of 4.6% in November.
The minutes, always released with a three-week lag, show a snapshot of officials' thinking before the release of more current data on the economy. Inflation and labor data for November was delayed as a result of the US government shutdown.
Tuesday's minutes showed officials expect inflation will remain "somewhat elevated" in the near term before gradually moving back to their 2% goal. Many expect that the effects of tariffs on core goods inflation will wane, although some expressed uncertainty about when these effects would diminish or the extent to which tariffs would ultimately be passed through to final goods prices.
In a split decision, the Fed lowered interest rates earlier this month by a quarter percentage point to a range of 3.5%-3.75%, marking the third rate cut this fall.
Fed Chair Jay Powell struck a cautious note at his press conference following the December meeting about further cuts into the New Year, saying that the committee was in a good place, where members could take a step back and take stock of the economy.
