According to minutes of the November meeting released on Tuesday, Fed officials expressed confidence that inflation was easing and the labor market was strong, so they could cut interest rates further, albeit gradually.
The minutes contained multiple statements suggesting officials were satisfied with the pace of inflation, although by most measures it remained above the Fed’s 2% target.
With this in mind, and confident that the employment situation remains fairly solid, FOMC members said further rate cuts were likely, but they did not specify when or how much.
“In discussing the outlook for monetary policy, participants expected that if data were released about
As expected, inflation continued to fall to 2%, and the economy
Maintaining near maximum employment levels and gradually moving to a more neutral policy stance over time may be appropriate,” the minutes said.
The FOMC voted unanimously at the meeting to lower the benchmark borrowing rate by 0.25 percentage points to a target range of 4.5%-4.75%. The market expects the Federal Reserve may cut interest rates again in December, but confidence has weakened due to concerns that President-elect Trump’s tariff plan may push up inflation.
The meeting ended two days after a contentious presidential campaign, with the Republican emerging as the victor and set to serve a second term starting in January.
There was no mention of the election in the minutes, except that staff noted that stock market volatility rose before results were announced on Nov. 5 and then fell. There is also no discussion of fiscal policy implications, although Trump’s plan, which also includes lower taxes and aggressive deregulation, is expected to have a significant economic impact.
Members did note, however, that there was widespread uncertainty about how the situation would evolve. In addition, they expressed uncertainty that the Fed would need to stop cutting interest rates before reaching a “neutral” rate that neither promotes nor suppresses economic growth.
“Many participants pointed out that uncertainty about the level of the neutral interest rate complicates the assessment of the degree of monetary policy restrictions, and they believed that a gradual reduction of policy restrictions would be appropriate,” the meeting minutes said.
Conflicting inflation signals and uncertainty about Trump’s policies have led traders to lower expectations for future rate cuts. The market’s implied probability of a rate cut in December has dropped below 60%, with a rate cut expected to be only three-quarters of a percentage point by the end of 2025.
Committee members appeared to spend much of the meeting talking about inflation progress and an overall stable economic outlook.
Policymakers have expressed confidence in recent days that current inflation readings are being driven by rising housing costs, which are expected to slow as the pace of rent increases slows and is reflected in the data.
“Almost all participants believe that although month-to-month trends will remain volatile, incoming data are generally consistent with a sustained return to 2%,” the document said.
“Participants cited a variety of factors that could put continued downward pressure on inflation, including the weakening of corporate pricing power, the Committee’s still restrictive monetary policy stance, and entrenched long-term inflation expectations,” the report added.
Policymakers have been expressing concerns about the labor market. Nonfarm payrolls rose by just 12,000 in October, although the meager gain was largely attributed to storms and labor strikes in the Southeast.
Officials said labor market conditions were generally solid.
Minutes of the meeting: “Attendees generally noted… that labor market conditions show no signs of deteriorating rapidly and layoffs remain low.”
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