Federal Reserve Signals Cautious Approach on Rates

Minutes from the Federal Reserve's December 17-18 meeting reveal a cautious outlook among officials regarding inflation and interest rate adjustments, with a consensus to slow the pace of rate cuts. The Fed cut rates by 25 basis points to a range of 4.25%-4.5%, but the decision was a close call, highlighted by dissent from Cleveland Fed President Beth Hammack. Policymakers expressed concerns over persistent inflation and potential policy shifts under the incoming Trump administration, which could affect trade and immigration. The expectation is for just two rate cuts in 2025, down from an earlier forecast of four, reflecting heightened inflation risks. While markets showed little reaction to the minutes, analysts noted the Fed's hawkish stance, suggesting that rates may need to remain elevated to combat stubborn inflation. Overall, the minutes underscore a delicate balance the Fed must navigate between curbing inflation and supporting economic growth.