Some Fed officials argued to keep interest rates on hold, meeting minutes show
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A New York Stock Exchange television shows Federal Reserve chair Jerome Powell speaking at a news conference earlier this month. Photo: Michael Nagle/Bloomberg via Getty Images
Some Federal Reserve officials were hesitant to support more interest rate cuts in 2026, according to minutes from the Fed's most recent policy meeting published on Tuesday.
Why it matters: The Fed is split over how much more to lower borrowing costs to support the economy, a division that might deepen next year against the backdrop of President Trump pressuring the central bank to lower rates.
State of play: The Fed earlier this month cut rates for the third consecutive time, though the decision garnered the most dissent since 2019.
- Two Fed presidents preferred to keep rates on hold, while Fed governor Stephen Miran, appointed by Trump earlier this year, preferred a larger cut.
What they're saying: Fed chair Jerome Powell signaled at a post-decision news conference that further rate cuts were far from guaranteed, echoing a sentiment evident among at least some officials at the policy meeting.
- "[S]ome 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 released on Tuesday said.
- A "few" officials said that would allow the Fed to observe how the central bank's previous cuts were impacting the labor market and the economy.
The other side: "Most" officials said that further rate cuts "would likely be appropriate if inflation declined over time as expected," the minutes show.
- But officials who were wary about cutting rates are worried that might not be the case.
- Those who preferred to keep rates on hold "expressed concern that progress toward the [Fed's] 2 percent inflation objective had stalled in 2025 or indicated that they needed to have more confidence that inflation was being brought down sustainably," according to the minutes.
What to watch: The economy is growing at a rapid clip, according to GDP data from the third quarter, but the labor market appears to be weak.
- Government shutdown-delayed data released after the Fed decision showed that inflation fell in November for the first time since the spring, though some Fed officials are still worried about tariff-related price effects, according to the minutes.
The intrigue: It is unclear how much the Fed's rate cuts will reinvigorate the jobs market, especially as businesses rely more on AI.
- "A number" of Fed officials referenced "technological progress and higher productivity growth, possibly reflecting increasing use of AI, could boost economic growth without generating price pressures and could also damp job creation," according to the minutes.
- Those officials highlighted a key challenge for the Fed in the months ahead: determining which economic conditions reflect structural economic factors as opposed to more temporary, cyclical ones.
What's next: Trump told reporters on Monday that he plans to announce his pick to lead the Fed sometime next month. Powell's term as Fed chair expires in May.
- Polymarket, a prediction market, shows a 45% chance that Trump will choose White House economist Kevin Hassett to lead the Fed, though odds that former Fed governor Kevin Warsh (32%) will get the nod have been rising in recent weeks.
