The reality of President-elect Donald Trump's election victory on a platform of aggressive tariffs and deportation of some immigrants landed hard at the Federal Reserve's meeting last month, with U.S. central bank officials raising new inflation concerns and staff suggesting the incoming administration's plans may slow economic growth and raise unemployment. Amid an otherwise sanguine outlook of continually slowing inflation, participants at the Dec. 17-18 meeting "noted that recent higher-than-expected readings on inflation, and the effects of potential changes in trade and immigration policy, suggested that the process could take longer than previously anticipated," according to minutes of that session released on Wednesday.
That uncertainty, along with the full percentage point in interest rate cuts delivered by the central bank's policy-setting Federal Open Market Committee in 2024, added to arguments for pausing further reductions in borrowing costs. "Most participants remarked that ... the Committee could take a careful approach in considering" further cuts, the minutes, opens new tab said in language that suggested a relatively high bar to further rate cuts for now. In comments this week, U.S. central bank officials, including Fed Governor Christopher Waller on Wednesday, said that while they expected more rate cuts this year, the pace and extent would depend on upcoming inflation data showing a further turn toward the central bank's 2% target. "I believe that inflation will continue to make progress toward our 2% goal over the medium-term and that further reductions will be appropriate," Waller said.
Source: Reuters