Federal Reserve officials are confident that inflation is easing and the labor market is strong, allowing for further interest rate cuts at a gradual pace. The November meeting minutes revealed that the Fed sees inflation moving down to its 2% target sustainably, while the jobs picture remains fairly solid. The Federal Open Market Committee members indicated that further rate cuts are likely to happen, though specifics were not provided.
The FOMC unanimously voted to cut its benchmark borrowing rate by a quarter percentage point to a target range of 4.5%-4.75%. Markets anticipate another cut in December, but uncertainty surrounding President-elect Donald Trump’s plans for tariffs has dampened conviction. The meeting took place shortly after Trump’s victory, but the election was not mentioned in the minutes.
While the minutes did not discuss the implications of fiscal policy, members expressed uncertainty about evolving conditions and the level at which rate cuts should stop before reaching a “neutral” interest rate. The conflicting signals on inflation and uncertainty over Trump’s policies have caused traders to revise their outlook for future rate cuts.
Overall, policymakers at the meeting focused on progress on inflation and a stable economic outlook, with most participants believing that inflation will return sustainably to 2%. They also highlighted factors putting downward pressure on inflation, including waning business pricing power and the Fed’s still-restrictive monetary policy stance. Despite a weaker-than-expected nonfarm payroll increase in October, officials remain optimistic about the general solidity of the labor market.
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