The minutes of the monetary policy meeting released by the Federal Reserve on the 26th show that Fed officials believe that if the economy performs as expected, a gradual rate cut and a shift to a more neutral policy stance may be appropriate.

After concluding the monetary policy meeting on November 7, the Fed announced a reduction of the federal funds rate target range by 25 basis points to between 4.5% and 4.75%. The minutes indicate that Fed officials are unclear about how close the current interest rate level is to the neutral rate level that neither restricts nor stimulates economic growth. Many officials stated that uncertainty has made the Fed's assessment of the degree of monetary policy restriction more complex, and therefore "gradually reducing policy restrictions is appropriate."

The minutes indicate that Fed officials generally believe that there are "no signs of a rapid deterioration" in the U.S. labor market, and the downside risks to employment and economic growth have "lessened." The pace of U.S. price increases has significantly slowed from its peak, but the core inflation rate, excluding food and energy prices, remains "elevated."