Fed officials discussed rate cuts last month and hinted at end of hikes, minutes show

Federal Reserve officials during their December policy meeting broached the subject of reducing interest rates, minutes from that meeting released Wednesday showed.

Federal Reserve officials during their December policy meeting broached the subject of reducing interest rates, minutes from that meeting released Wednesday showed. Officials’ latest economic projections released in December showed that they expect to cut rates this year for the first time since kicking off a historic inflation-busting campaign in March 2022. The central bank has seen substantial progress since then: Inflation is currently running under 3%, as measured by the Fed’s preferred inflation gauge, the Personal Consumption Expenditures price index, and is well below a four-decade peak reached in the summer of 2022. While some officials remained wary of upside risks to inflation during December’s meeting, according to the minutes, they also recognized that the Fed’s key interest rate is “likely at or near its peak for this tightening cycle.” Fed officials “judged that the current stance of monetary policy was restrictive and appeared to be restraining economic activity and inflation,” but that “it was possible that the economy could evolve in a manner that would make further increases in the target range appropriate,” the minutes said. Officials also saw it “appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the Committee’s objective.” Wall Street is eager for rate cuts, with some investors pricing in that first cut in the spring. However, officials have come out to temper that optimism, stressing that there are still risks that could sabotage inflation’s defeat.