Federal Reserve officials at last month's meeting pointed to an increased risk that inflation could worsen. This is the main reason why we haven't changed the benchmark interest rates.
President Donald Trump's proposed tariffs and massive immigrant deportation and strong consumer spending could boost inflation this year, according to minutes of the January 28-29 meeting released Wednesday. It was a sexual factor.
“They would want to see further advances in inflation before cutting further,” said 19 Fed officials who participated in the interest decision.
They reduced the Fed's key rate to 4.3% after cutting it from a two-year height of 5.3% late last year.
The Fed's suspension is less likely to immediately reduce consumer borrowing costs, including mortgages, car loans, and credit cards.
Last week, the government released data suggesting that inflation is actually worsening, leading many economists to predict one this year (if there is, if there is, only one).
The Labor Bureau said consumer prices rose 3% in January, up from a 3.5-year low of 2.4% in September last year.
However, the Fed closely follows another inflation measure that shows inflation is close to 2.5%.
The minutes also cited the “highly uncertainty” surrounding the economy, so it was appropriate for the Fed to “take a careful approach” when considering further changes to key interest rates.
All Fed policymakers support changing the key rates for last month, the minutes said.
The unanimity comes after signs of growing discrepancy in recent months between authorities who support further interest rate cuts and those who are more concerned about stubborn inflation.
A key issue, especially on Wall Street, is how long the Fed's rate cuts will continue to suspend. Wall Street investors are hoping that the central bank will not be cut again until July, according to futures prices. They don't predict a second cut until 2026.
Many Fed officials also want to see how Trump's proposed tariffs and immigration crackdown will affect the economy. While most economists predict that tariffs will boost inflation, some argue that Trump's promise to reduce regulations can lower consumer prices over time.
On Monday, Fed Gov. Christopher Waller said A speech in Australia He expects prices to drop again this year, but for now he supports the suspension.
If Waller turns out to be blips, as the increase in inflation last month did in January 2024, “At some point this year, rate cuts would be appropriate.”
Waller also said he doesn't think the new tariffs will significantly raise inflation, adding that the price rise is likely to be temporary. As a result, he said the Fed should not necessarily change its policies due to tariffs.
“I haven't changed my outlook based on what has been implemented so far,” he said.
