The Federal Reserve is signaling more interest rate cuts are on the way, but it will first pause its back-to-back rate cuts to allow officials more time to gauge how the U.S. economy fares early next year.
The Fed's December minutes showed policymakers divided on the pace of additional rate cuts, but a pause "for some time" is in the offing
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The Federal Reserve is signaling more interest rate cuts are on the way, but it will first pause its back-to-back rate cuts to allow officials more time to gauge how the U.S. economy fares early next year.
The Fed released its official record of the two-day meeting on Dec. 9-10 in which policymakers deliberated whether interest rates needed to be adjusted. Officials on the Federal Open Market Committee ultimately voted 9-3 to lower borrowing costs by a half-percentage point, bringing the federal funds rate between 3.5% and 3.75%.
However, the minutes showed policymakers divided on the pace of additional rate cuts. Inflation remains elevated due to tariffs weighing on the U.S. economy, but that has also been coupled with a weakening labor market. Fed officials are split on which development to prioritize with their interest rate toolkit.
"With respect to the extent and timing of additional adjustments to the target range for the federal funds rate, some participants suggested that, under their economic outlooks, it would likely be appropriate to keep the target range unchanged for some time after a lowering of the range at this meeting," the minutes said. Other officials who cast a vote to lower interest rates said they could have also been satisfied with putting further rate cuts on hold.
Lower interest rates tend to spur economic activity while higher rates are capable of throttling inflation. Fed officials are signaling two interest rate cuts over two years, which would bring overall borrowing costs to 3%.
After the Fed meeting concluded earlier this month, Fed Chair Jerome Powell said the central bank would take a "wait and see" approach to lowering borrowing costs. Powell's term expires in May 2026.
President Donald Trump renewed his attacks against Powell on Monday, threatening to sue him for "incompetence" over an expensive renovation of the Fed's aging headquarters in Washington, D.C.
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