(Bloomberg) -- Federal Reserve officials in December adopted a new stance on rate-cutting amid elevated inflation risks, deciding to move more slowly in the months ahead.
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“Participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” minutes from the Federal Open Market Committee’s Dec. 17-18 gathering showed. “Many participants suggested that a variety of factors underlined the need for a careful approach to monetary policy decisions over coming quarters.”
They cited higher inflation readings, continued strength in spending, and reduced downside risks to the outlook for the labor market and economic activity, the minutes, released Wednesday in Washington said. US central bankers cut their benchmark lending rate by a quarter-point at that meeting to a range of 4.25% to 4.5%.
The Fed’s staff incorporated “placeholder assumptions” about potential policy changes under incoming US President Donald Trump, resulting in an economic growth forecast that was slightly slower, with inflation also expected to remain firm.
The minutes showed “a number” of policymakers indicated they also included placeholder assumptions in their updated economic projections. “Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said.
Officials expected the US jobs market to remain solid. However, they “generally noted that labor market indicators merited close monitoring.”
The next monthly employment report from the Bureau of Labor Statistics is due Friday.
The December move marked a full percentage point in reductions since September. The rapid pace produced a dissenting vote in September and another in December - each a rarity under Chair Jerome Powell.
Powell said in his post-meeting press conference the December cut was a “closer call” than previous reductions.
“Some participants stated that there was merit in keeping the target range for the federal funds rate unchanged,” the minutes said. “A majority of participants noted that their judgments about this meeting’s appropriate policy action had been finely balanced.”
Cleveland Fed President Beth Hammack dissented, preferring to hold rates steady, and updated forecasts showed three other officials agreed. Governor Michelle Bowman voted against the half-point cut in September, preferring a smaller reduction.