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The Federal Reserve's policymaking arm released minutes of its most recent meeting on Wednesday in which central bank officials noted how uncertainty surrounding President-elect Trump The policies to be implemented are weighted on their outlook for inflation.
The Federal Open Market Committee (FOMC) is tasked with making decisions on monetary policy and is made up of regional rotating groups. Federal Reserve The president of the bank sets the central bank's target range for the benchmark federal funds rate
Minutes from the Fed's December meeting, where policymakers cut rates by 25 basis points to a range of 4.25% to 4.5%, show uncertainty among FOMC members about the direction of economic conditions as well as future public policy changes. Fed Chair Jerome Powell noted that the cut was a “close call” given stubborn inflation and a softening labor market, adding that the Fed may slow the pace of interest rate adjustments in the future.
“Regarding the outlook for inflation, participants expected inflation to move toward 2 percent, although they noted that recent higher-than-expected readings on inflation, and the impact of potential changes in trade and immigration policies, suggested that the process could take longer than previously expected,” The FOMC minutes said.
The FED's preferred inflation measure was lower than expected in November, but remained elevated
The FOMC minutes showed that policymakers see uncertainty about the path of inflation due to Trump's potential tariff and immigration changes. (Photographer: Ting Shen/Bloomberg via Getty Images/Getty Images)
The minutes added that several participants noted that the process of deflation may have stalled, or is at risk of stalling, with inflation above the Fed's 2% target. The most recent consumer price index (CPI) reading came in at 2.7%, while the Fed's choice Inflation GaugeKnown as the Personal Consumption Expenditure (PCE) index, was 2.4%.
Positive feelings were noted among other participants financial markets And the pace of economic activity could put upward pressure on inflation, while there was a consensus about policy uncertainty related to the incoming administration.
“All participants judged that there is increased uncertainty about the scope, timing, and economic impact of potential changes in policy affecting trade and immigration,” the FOMC minutes noted.
The Federal Reserve cut interest rates by a quarter point in December
Federal Reserve Chair Jerome Powell said after the last rate cut that the Fed may slow rate cuts in response to economic conditions. (Photo by Liu Ji/Xinhua via Getty Images/Getty Images)
Trump has called for mass deportations of illegal immigrants and recently pushed back on reports that his transition team is softening. Tariff Plan He outlined during the presidential campaign. Economists have raised concerns that these policies could put upward pressure on consumer prices, which FOMC members noted in meeting minutes.
“Almost all participants judged that upside risks to the inflation outlook have increased. As reasons for this judgment, participants cited the recent stronger-than-expected readings on inflation and the potential impact of potential changes in trade and Immigration Policy” said the minutes.
Fed-watchers noted a high degree of uncertainty in the FOMC minutes regarding the course of interest rates, inflation and economic growth stemming from the new administration's plans.
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Jeffrey Roach, chief economist at LPL Financial, noted, “The word 'uncertain' or a derivation of it is mentioned twelve times throughout the official records of the Federal Open Market Committee. Forecasters are finding it increasingly difficult to model the path for interest rates, growth, and inflation due to Uncertainty is still building around Trump's policies.”