Fed Officials Are Deeply Split on Rate Cuts

Federal Reserve officials hit the brakes on interest-rate cuts last month, and they can't quite agree on what comes next. Minutes from the Jan. 27–28 policy meeting, released Wednesday, show a split Fed: several officials said more cuts could be appropriate later this year if inflation continues to cool, while others argued rates should stay put "for some time" and warned that further easing might have to wait until a clear disinflation trend is restored. A few even wanted the Fed's statement to explicitly acknowledge that rate hikes could return if inflation stays stubbornly above the 2% target, CNBC reports.

The central bank has already lowered its benchmark rate three times since September, to 3.5%–3.75%. The January meeting was the first with a new slate of regional Fed voters, including Dallas' Lorie Logan and Cleveland's Beth Hammack, who have both signaled support for holding rates steady. Two governors, Christopher Waller and Stephen Miran, dissented in favor of another cut. As the White House's nominee Kevin Warsh—seen as more pro-cut—awaits confirmation as the next Fed chair, traders are betting the next move down won't come until June, with another possible in early fall.

According to the minutes, the "vast majority" of the 19-member rate-setting committee agreed there were signs the job market had stabilized, which reduces the need for rate cuts to boost hiring, the AP reports. They mostly expected inflation to come down this year, "though the pace and timing of this decline remained uncertain." The Fed's preferred measure of inflation is expected to come in at 3% when figures are released Friday. After last month's meeting, Fed chair Jerome Powell, whose term expires in May, said the central bank was "well positioned" to wait for months before making another move on interest rates. He downplayed the possibility of a rate hike, saying, "That's not where people's expectations are right now," per the Wall Street Journal.