Original Title: "Federal Reserve Meeting Minutes: 'Most' Officials Expect Further Rate Cuts to Be Appropriate After December, Some Advocate Maintaining Rates 'For a Period of Time'"
Original Author: Li Dan, Wall Street Insights
The minutes showed that, while overcoming significant internal disagreements three weeks ago to decide on continuing rate cuts, most officials expected that further rate cuts would be appropriate in the future if the downward trend in inflation aligns with their expectations. However, some policymakers believed that the rate-cutting cycle should be paused "for a period of time," reflecting the Federal Reserve's cautious stance toward rate cuts in early next year.
On Tuesday, the 30th in Eastern Time, the Federal Reserve released the minutes from its December 9-10 monetary policy meeting, which stated that during discussions about the outlook for monetary policy, participants expressed differing views on whether the Federal Open Market Committee's (FOMC) policy stance was restrictive.
"Hello, how areMostParticipantsthink,If inflation gradually declines as expectedthenMay be suitable for further"Please enter a validInterest rate cut.
AboutFurtherThe magnitude and timing of interest rate cuts, "Part"Please enter a valid(some)ParticipantsExpress, based on their forecast of economic prospects, after the interest rate cut at this meeting, "It may be necessary to maintain the target range for the federal funds rate unchanged for some time."。" translates to
"A few participants noted that such an approach would allow policymakers to assess the lagged effects on the labor market and economic activity of the more neutral policy stance the (FOMC) committee has recently adopted, while also giving policymakers time to gain greater confidence that inflation is returning to 2%."
All participants agreed that monetary policy is not predetermined, but is instead formulated based on the latest data, evolving economic outlooks, and assessments of risk balances.
A majority of attendees supported a rate cut in December, with a minority possibly having favored maintaining the current stance.
Three weeks ago, the Federal Reserve cut interest rates by 25 basis points for the third consecutive FOMC meeting, as expected by the market, but...Three votes against the interest rate decision for the first time in six years.Among the dissenters, Council member Millan, appointed by Trump, continued to advocate for a 50-basis-point rate cut. Two regional Fed chairmen supported maintaining the current rate, and the dot plot indicated that four officials without voting rights also believed rates should remain unchanged. In total, seven individuals opposed the decision. By this count, the Fed has experienced its largest internal division in 37 years.
The minutes of this meeting also revealed divisions among the Federal Reserve's policymakers regarding a rate cut in December.
The minutes stated that participants noted inflation had risen since the beginning of the year and remained at a high level, while current indicators showed economic activity expanding at a moderate pace. They observed that job growth had slowed this year, and the unemployment rate had slightly increased as of September. Participants assessed that recent indicators were consistent with these developments, and also noted that "downside risks to employment have increased in recent months."
Given the above background,"Most"ParticipantsSupporting a rate cut at the December meetingWhile "some" people tend to keep interest rates unchanged. "Among those who favored a rate cut,A few (a few) imply., this decision isAfter careful considerationOr, theyThis could support maintenance.Target Range for the Federal Funds RateUnchanged."
The participants generally supported the rate cut, believing that this decision was appropriate becauseThe downside risks to employment have increased in recent months."Meanwhile, the upward risks to inflation have somewhat diminished or remained largely unchanged since early 2025."
The minutes indicated that policymakers leaning against a rate cut in December were concerned about the inflation outlook. They either believed that progress toward lower inflation this year had stalled or argued that more confidence was needed that inflation could return to the Fed's 2% target. These participants also noted that if inflation did not return to 2% in a timely manner, long-term inflation expectations could rise.
The minutes then noted that "some" participants who supported or might support maintaining the current stance believed that a significant amount of labor market and inflation data would be released during the period between the next two FOMC meetings, which would help assess whether a rate cut would be necessary. A "few" participants considered a rate cut in December to be unwarranted, as the data received during the period between the November and December meetings did not indicate any further noticeable weakening in the labor market.
Most of the participants believed that cutting interest rates would help prevent deterioration in the labor market. Some noted the risk of entrenched inflation.
Although internal disagreements were revealed, the extent of the divergence reflected in the meeting minutes was not as severe as some external observers suggested.
First,Minutes from the previous meeting in NovemberIt showed that at the FOMC meeting at that time, many participants believed that holding interest rates steady throughout the year might be appropriate, while several thought it would be appropriate to continue cutting rates. Nick Timiraos, a senior Fed reporter known as the "New York Fed's press," pointed out that "many" refers to a larger number than "several," although most officials still believed that rate cuts would be appropriate in the future, regardless of whether it was in December or not.
Moreover, this minutes indicate that at the December meeting, a majority of participants supported a rate cut that month, including some officials who had previously leaned toward pausing the rate cuts this month.
Second, the minutes also indicated that there was considerable disagreement among Federal Reserve policymakers at the December meeting regarding which posed a greater threat to the U.S. economy— inflation or unemployment. Most believed that cutting interest rates would help prevent deterioration in the labor market. The minutes stated:
When discussing risk management factors that could affect the outlook for monetary policy, participants generally judged that the upside risks to inflation remain high, while the downside risks to employment are also significant and have increased since mid-2025.MostThe participants pointed out that,Shifting to a more neutral policy stance would help prevent a significant deterioration in the labor market.Many of these participants also noted that the existing evidence suggests a reduced likelihood of tariffs causing persistent high inflationary pressures.
By contrast, Fed officials who supported not cutting interest rates emphasized the risks of inflation. The minutes stated:
"Hello, how areSome (several)The participants pointed out that there exists...The risk of rising inflation becoming entrenchedand believes that further reductions in policy interest rates are warranted despite persistently high inflation data.May be misunderstood as,Imply that policymakers' commitment to the 2% inflation target has weakened.Participants judged that risks needed to be carefully balanced and agreed that well-anchored long-term inflation expectations were critical to achieving the Committee's dual mandate.
The reserve balance has been reduced to an adequate level.
At the December meeting, as expected by Wall Street, the Federal Reserve launched its Reserve Management Program (RMP), deciding to purchase short-term Treasury securities at year-end to address pressures in the money market. The statement from the meeting at that time read:
The FOMC Committee believes that,The reserve balance has been reduced to an adequate level.and thenStart purchasing short-term government bonds as needed., and thus it continuesMaintain an adequate supply of reserves."
The minutes also reiterated that the condition for initiating the RMP is met when the reserve balance reaches the threshold. The minutes stated,
When discussing issues related to the balance sheet, the participants unanimously agreed that,"The reserve balance has been reduced to an adequate level."FOMC stands for Federal Open Market Committee."We will purchase short-term government securities as needed to continuously maintain an ample supply of reserves."