December Fed Minutes Show Cautious Path Despite Rising Risks

The Federal Reserve’s December meeting minutes show a complex policy landscape, with officials increasingly worried about inflation risks while maintaining their easing bias. Despite cutting rates for the third consecutive time to 4.25%-4.5%, there was notable discussion about inflation risks, particularly regarding incoming President Trump’s proposed trade and immigration policies. While some officials advocated for holding rates steady, and Cleveland Fed President Beth Hammack dissented in favor of no cut, the committee remained open to further easing if inflation moderates and labor markets remain strong. This stance contrasts with external views, such as monetary policy expert Adam Posen’s prediction that the Fed might need to start hiking rates by summer due to Trump’s economic plans.