The Fed’s December minutes show divided positions, but it foresees more rate cuts if its forecasts are met

Members of the Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) were divided at their last meeting on December 10, when they opted to cut interest rates by 25 basis points and bring them to the range of 3.50% to 3.75%, but they see more cuts on the horizon. “Most participants considered that further downward adjustments would be appropriate in the target range for interest rates if inflation decreases over time, as expected,” the base case document explained.

According to the minutes of that meeting, the vote was 9 to 3 to lower the reference rate, which represented the largest number of discrepancies recorded since 2019 due to the balance between inflation and employment. So, two members advocated maintaining rateswhile another defended reducing them by half a point.

However, there was not much agreement on the specific direction or pace that future US monetary policy should take, especially given the forecast of “moderate” GDP growth and upward risks to prices already down for the labor market. In fact, “a few” of those who supported the majority position of a 25 basis point cut also acknowledged that they could have supported leaving rates unchanged.

“Some of those who supported lowering interest rates at this meeting indicated that The decision had been very close. or that they could have supported maintaining the target range without changes,” the Fed said. For its part, the two members who continued with rates warned that they feared that the disinflation process had stopped in 2025 or, failing that, that they needed “more confidence” that prices were converging in a “sustained” manner with the stability objective of 2%.

The FOMC as a whole predicted that President Donald Trump’s tariffs were increasing inflation, but they also largely agreed that the impact would be temporary and would likely cool in 2026. “Some participants suggested that, given their economic outlook, they would probably it would be appropriate to keep the target range unchanged for some time after the reduction of the rank in this appointment”, the minutes have advanced.