The Federal Reserve officials in the month of December appear to have taken a rather different approach altogether to rate cuts as there are higher inflation risks, and considering there are high risks for inflation, rate cuts will be at a slower pace for the upcoming months.

At a meeting on December 17-18 , it was reported that “Some participants mentioned that the committee is probably at a stage or very close to being at a stage where it would not want to ease policy restrictions any further”, referring to the need to cut back. “Most participants now seem to believe that there is a wide range of factors which should support a bit more caution in terms of taking monetary policy decisions in the next few quarters.”

Inflation expectations have increased, consumption expenditure persisted, and the outlook for employment and economic activities were positively skewed, as stated in the Minutes issued on Wednesday in Washington. As a result, US Central Banks proportionately dropped their lending rate by 0.25 pb from 4.5 to 4.25 pb.

The Fed’s staff integrated “placeholder assumptions” for any changes in policy by the newly inaugurated US President Donald Trump and as a result, the growth forecast slowed down but inflation was still expected to be stable.

The minutes revealed that: Some policymakers claimed to have some number present” while making their updates to the economic projections. The rest came to the conclusion that the chances of inflation outlook had increased.

As a result of the peak in the unemployment rates across all states in the US in 2022, the officials assumed that the job stability in the Country would be intact. Still, labour market indicators were put under close monitoring by them.

According to CBS News, Friday will see the return of the employment report released by the BLS on a monthly basis.

The reductions saw the US economy specifically in the area of employment rates drop by a full percentage point since September. This noticeably rapid drop was the reason for dissenting votes previously in both September and later in December which under Jerome Powell, have mainly been anomalies.

PBS News reported that the Chairman was not for the last month reduction of rates, however, he did confess in regard to further meetings that it was a “close call” cut.

As per the recaps: Some participants “believed that it does make sense to keep current target range for the federal funds rate unchanged.” While others “completely noted that regarding the determined measures of the meeting, all were in agreement.”This synchronous voting means that no one was against the other.

Support for cutting rates was intended and with the updated estimates made by Cleveland Fed President Beth Hammack which preferred the cuts to be left at the same rate, where they later were easy to cut and where they were not.

The latest predictions showed a median estimate of two rate reductions in 2025 after the December meeting, a notable decrease from the four policymakers in September. The Fed’s favored inflation gauge reflects the committed change in sentiment about inflation risks.

There Are Worries

There has been a significant and broad increase in price indexes recently, however, the personal consumption expenditures price index increased by 2.8%, while food and energy were omitted. Officials from the Fed have expressed that they are not in a rush to lower interest rates as they consider it necessary to wait for inflation to fall significantly.

“Since September, the resistance within the labor market has slightly increased, while inflation remained stronger than anticipated since last September, ” Fed Governor Lisa Cook remarked during the telephonic conversation. “In this context, however, I believe that further measures can be taken but let these be more restrained.”

It is expected that Xiaomi’s prediction on inflation, interest and inflation rates will be inaccurate as a result of Trump’s forces and engagement policy, in addition to taxes and trade tariffs that are expected to make a large change.