FOMC Minutes Highlight Fed’s Concerns About Trump Policies
The Federal Reserve released the minutes of its December 17-18 meeting on Wednesday, revealing heightened concerns among officials about the economic impact of President-elect Donald Trump’s policy proposals.
Based on the minutes, the Federal Open Market Committee (FOMC) discussed a range of issues, from inflation risks to the anticipated slowdown in rate cuts, reflecting the Fed’s cautious approach heading into 2025.
Fed’s Cautious Approach to Rate Cuts Amid Inflation and Economic Risks
The FOMC minutes highlighted the decision to implement a 25-basis-point (0.25%) rate cut. Almost all participants advocated for a gradual approach to further monetary easing.
Several officials emphasized the importance of data-dependent decision-making, particularly as inflation remains above target levels.
“Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters,” the minutes noted.
Some officials, however, argued for flexibility. They pointed to scenarios where rate cuts might be accelerated if inflation trends downward or if labor market conditions deteriorate more than expected.
Despite these diverging views, the overarching sentiment was one of prudence to avoid policy missteps as the Fed continues to assess the neutral rate.
The minutes indicated a growing concern over inflation risks, which many Fed members attributed to Trump’s trade and immigration policies.
Core personal consumption expenditures (PCE) inflation stood at 2.8% in October, and officials expected progress in bringing it down to be slower than initially anticipated.
“Inflation risks remain balanced, though higher-than-expected recent readings warrant close monitoring,” the report added.
While the labor market has shown slight easing, unemployment remains low at 4.2%, and GDP growth is expected to stay solid.