Federal Reserve officials agreed that inflation is likely to continue slowing this year, but they also saw a risk that price pressures will continue due to the impact of the policies expected from President Donald Trump’s government.the minutes of the last meeting of the US central bank showed on Wednesday.
“Participants expected inflation to continue moving toward 2%, but noted recent higher-than-expected inflation readings and the effects of potential changes in trade and immigration policysuggested that the process could take longer than previously anticipated,” the minutes said.
“Several observed that the disinflationary process could have temporarily stalled or pointed out the risk that this might be the case,” added the minutes of the December 17 and 18 meeting in which the Fed lowered its interest rate by a quarter of a percentage point.
Minutes describe the Federal Open Market Committee’s December rate cut as “finely balanced,” with some participants pointing to the “merits” of not reducing borrowing costs in light of what they saw progress on tapering stalling. of inflation.
Given future uncertainty and the full percentage point of reductions already made to the benchmark interest rate in 2024, “Participants indicated that the Committee was at or near the point at which it would be appropriate to slow the pace of monetary policy easing,” according to the minutes.
“Most participants noted that … the Committee could take a cautious approach when considering” further cuts.
The minutes showed policymakers faced with a suddenly tangled set of new influences in an economy that begins the year with relatively low unemployment, strong growth and inflation that remains above the 2% target, but is expected to decrease.
Fed staff “highlighted the difficulty” of guessing what awaits a government that has promised to deport undocumented immigrants, tighten borders and increase taxes on imported goods, but said it could lead to slower growth and higher unemployment.
“After incorporating recent data and preliminary assumptions about possible policy changes, real GDP growth was projected to be slightly lower than in the previous baseline forecast, and the unemployment rate was expected to be slightly higher “the minutes said about staff assessments of policies that could begin with the return of President-elect Donald Trump.
In addition to higher tariffs, volatile trade relations and strict immigration rules, Trump, who takes office on January 20has also promised looser regulations for businesses and tax cuts.
Monetary policymakers say it will take time to determine the net impact of those policies on growth, employment and inflation.
The Fed is expected to keep the policy rate at the current range of 4.25%-4.50% at its meeting on January 28-29.
