Fed minutes show officials divided over future rate cuts

By Mucahithan Avcioglu

ISTANBUL (AA)—Divided Federal Reserve members said at their January meeting that additional interest rate cuts should be delayed for the time being but might continue later in the year if inflation slows, according to the minutes of the last Fed meeting released on Wednesday.

While the decision to keep the central bank's benchmark rate constant was widely approved, the way forward appeared less certain, with members torn between battling inflation and helping the labor market, according to minutes from the January 27-28 meeting.

“In considering the outlook for monetary policy, several participants commented that further downward adjustments to the target range for the federal funds rate would likely be appropriate if inflation were to decline in line with their expectations,” the document said.

Participants at the meeting, however, disagreed on the direction of policy, with officials arguing over whether the emphasis should be on bolstering the labor market or combating inflation.

“Some participants commented that it would likely be appropriate to hold the policy rate steady for some time as the Committee carefully assesses incoming data, and a number of these participants judged that additional policy easing may not be warranted until there was a clear indication that the progress of disinflation was firmly back on track,” the minutes stated.

Furthermore, some wanted the post-meeting statement to more accurately represent "a two-sided description of the Federal Open Market Committee's future interest rate decisions" and even contemplated the idea that rate hikes might be on the table.

"The possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels" would have been indicated in such a description.

The meeting minutes use a variety of characterizations to characterize positions, alternating between "some," "a few," and "many," and they even make two infrequent references to "a vast majority." They do not name specific participants.

The majority of participants anticipated that inflation would drop over the year, "though the pace and timing of this decline remained uncertain." They acknowledged the effect tariffs were having on prices and stated that they anticipated this effect to lessen throughout the course of the year.

“Most participants, however, cautioned that progress toward the Committee’s 2 percent objective might be slower and more uneven than generally expected and judged that the risk of inflation running persistently above the Committee’s objective was meaningful,” the document said.