Fed Adopts Cautious Approach to Rate Cuts in 2025

Federal Reserve officials have adopted a cautious approach to interest rate adjustments in 2025 due to elevated inflation and uncertainties surrounding the incoming Trump administration's trade and immigration policies. The Fed's December meeting minutes revealed a decision to slow the pace of rate cuts, with only two anticipated this year as inflation remains above the 2% target. Despite some officials like Christopher Waller advocating for further rate cuts, the overall sentiment is tempered by potential inflationary pressures from proposed tariffs. The minutes highlighted the difficulty in mapping out a clear path for interest rates amidst economic uncertainties and policy changes. Market participants are adjusting expectations, with many anticipating the Fed will hold rates steady in the near term, while some analysts project no cuts in the first quarter of 2025.