According to the minutes of the Federal Reserve’s January meeting, which were released Wednesday, policymakers favored a wait-and-see approach regarding additional rate cuts, citing the need for additional proof that inflation is slowing at a time when the economy is still strong and concerns about the inflationary impact of tariffs threaten to reverse the central bank’s progress toward the 2% inflation target.
“Many participants, however, emphasized that additional evidence of continued disinflation would be needed to support the view that inflation was returning sustainably to 2 percent,” according to Fed minutes.
The Federal Open Market Committee, or FOMC, maintained its benchmark rate between 4.25% and 4.5% at the end of its January meeting.
Expectations for a protracted Fed pause have been heightened since the Fed meeting by incoming economic data, comments from Fed chair Jerome Powell, and a plethora of economic data, including inflation and hotter jobs.
Participants noted that “the Committee was well positioned to take time to assess the evolving outlook for economic activity, the labor market, and inflation, with the vast majority pointing to a still-restrictive policy stance.” Fed members agreed with the call for a protracted pause.
The Fed doesn’t need “to be in a hurry” to cut interest rates because monetary policy is already less restrictive and the economy is still doing well, Powell told the Senate Banking Committee earlier this month.
Powell stated, “We do not need to adjust our policy stance because it is now significantly less restrictive than it was and the economy is still strong.”
