The minutes of the Federal Reserve’s interest rate decision meeting held on December 9-10 have been released.
Here are the details you need to know about those minutes:
- A minority of participants argued that a rate cut in December would not be reasonable.
- Policymakers stressed that it needed to be clearly communicated that the purpose of Treasury bond purchases was solely to ensure interest rate stability and that this was not related to monetary policy.
- Most participants indicated that shifting to a more neutral policy stance would help prevent a potential deterioration in the labor market.
- Participants believed that reserve balances had fallen to adequate levels and that it was now appropriate to begin managing reserves by purchasing US Treasury bonds.
- Some participants noted that the risk of persistently high inflation may be entrenched, and that further interest rate cuts could call into question the Fed’s commitment to its 2% inflation target.
- Participants agreed that reserve balances had fallen to a sufficient level.
- Some participants said that keeping interest rates steady for “a while” after the rate cut in December would be appropriate.
- Fed officials projected a slightly more optimistic outlook for economic growth compared to their October meeting.
- Most participants thought that further monetary easing would be appropriate if inflation were to decline over time.
- Some participants who supported the interest rate cut noted that the decision involved a delicate balance and that they might also support keeping interest rates unchanged.
- A majority of participants supported a rate cut in December.
At that meeting, the Fed lowered its policy interest rate by 25 basis points to the 3.50–3.75 percent range. However, the decision was made with three dissenting votes. Two regional Fed presidents argued that the rate cut was unnecessary, while Fed Board member Stephen Miran was the only one to call for a more aggressive 50 basis point cut, his third since taking office in September.
In post-meeting remarks, Federal Reserve Chairman Jerome Powell noted that while inflation remains above the 2 percent target, there are signs of weakening in the employment outlook, highlighting the differences of opinion within the board. Powell stated, “There are members with strong opinions on which risks warrant more policy attention. This is not a situation where everyone agrees on the direction and what needs to be done.”
*This is not investment advice.
