Federal Reserve officials indicated a more cautious approach to monetary policy, suggesting they will slow the pace of interest rate cuts after December, according to the minutes from the latest Federal Open Market Committee (FOMC) meeting.
The decision reflects concerns over persistent inflation risks, with participants noting that while inflation is expected to gradually move toward the 2% target, potential changes in trade and immigration policies could prolong the process. These factors were attributed in part to policies introduced during the Trump administration.
"Almost all" committee members highlighted the elevated risks to inflation, underscoring the need for flexibility in policy decisions as the Fed navigates an uncertain economic landscape.
Despite the cautious tone, the minutes offered no major surprises for markets, which showed little reaction to the release. Investors had largely anticipated the Fed's shift to a more gradual approach amid ongoing economic uncertainties.
“The Fed minutes signal officials are hawkish, and we believe that we’re not likely to see more than one rate cut in 2025 – at most,” Nigel Green, CEO of deVere Group commented.
“This stance reflects a mounting realization that inflation remains dangerously sticky, and the interest rate needed to bring it fully under control needs to remain higher than many previously anticipated.”