Further interest rate cuts are not imminent amid sticky inflation and economic uncertainty, the minutes from the Federal Reserve’s latest rate-setting meeting held in January have revealed.
At the conclusion of the meeting, the central bank kept its benchmark rate steady at 4.3%, with members expressing caution around cutting rates too quickly.
“Participants cited the possible effects of potential changes in trade and immigration policy, the potential for geopolitical developments to disrupt supply chains, or stronger-than-expected household spending,” per the minutes, released on Wednesday afternoon.
For example, President Donald Trump’s proposed tariffs could further delay rate cuts as they would likely push inflation higher, forcing the Fed to remain restrictive for longer.
deVere Group’s Nigel Green believes the minutes seem to confirm officials are in no hurry to ease monetary policy.
“The central bank’s cautious stance reflects the risk of inflation reigniting and current financial conditions and trade policy changes keeping pressure on policymakers to stay the course,” Green said.
“Markets had been looking for any hint of dovishness, especially after last week’s mixed inflation data and a sharp drop in retail sales that temporarily pushed Treasury yields lower. However, the minutes appear to reinforce the Fed’s wait-and-see approach, with members expressing concern over cutting rates too soon.”
Green added that investors betting on imminent rate cuts could be setting themselves up for disappointment.
“The Fed is making it clear, we believe, that inflation remains a risk, and that premature cuts could backfire. The reality is that policymakers are still evaluating economic data, and shifting policy, and there’s seemingly no urgency to shift gears,” Green said.
“The Fed minutes seem to confirm what should have been evident—policy easing will only happen when conditions warrant it, not because markets want it.”
US stocks were mixed following the release of the Fed meeting minutes. The Nasdaq added 0.3%, the S&P 500 added 0.2%, while the Dow Jones was flat.