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Real-time News
December 31st - According to the minutes released Tuesday, some Federal Reserve officials expressed reluctance to support further policy easing in the near term when the Fed decided to cut interest rates at its meeting this month, suggesting that further rate cuts may face resistance at its next meeting in January. The minutes showed that the decision to cut rates became increasingly difficult as inflation persisted longer than the Fed had anticipated. Since the December meeting, more economic data has been released, showing that strong consumer spending has helped drive robust economic growth, despite a slight increase in the unemployment rate. New data scheduled for release next month may reshape the thinking of Fed officials ahead of their rate meeting in late January.On December 31st, Fxstreet analyst Joshua Gibson pointed out that the Federal Reserve released the minutes of its final interest rate decision of the year, confirming that FOMC members were willing to consider further rate cuts. However, the minutes did not reveal much other significant information. The Feds stance is tilting towards a dovish position, with most policymakers willing to explore the possibility of further rate cuts. However, the Feds policy adjustments still depend on weak inflation data, rather than a lack of inflation data.On December 31st, the Federal Reserve meeting minutes, in its staff economic outlook, noted that overall, real GDP growth is expected to accelerate slightly through 2028 compared to the projections prepared for the October meeting. This primarily reflects the anticipated greater support from financial market conditions and stronger expectations for potential output growth. After 2025, as the negative impact of high tariffs diminishes and fiscal policy and financial market conditions continue to support spending, GDP growth is expected to remain above potential growth through 2028. Consequently, the unemployment rate is expected to gradually decline after this year, reaching a level slightly below the staffs estimated natural rate of unemployment in 2027. Overall, staffs inflation projections for 2025 and 2026 are slightly lower than those presented at the October meeting, but their projections for 2027 and 2028 remain similar to previous projections.On December 31st, the Federal Reserve meeting minutes revealed that participants generally expected economic growth to accelerate in 2026, and that economic activity to expand at roughly the same pace as potential output over the medium term. Many participants anticipated that adjustments to fiscal and regulatory policies, or more favorable financial market conditions, would support economic growth. However, participants believed that uncertainty regarding their forecasts for real GDP growth remained high. Furthermore, some participants noted that structural factors such as technological progress and productivity gains (potentially reflecting increased applications of artificial intelligence) could promote economic growth without creating price pressures, but could also dampen job growth.On December 31st, the Federal Reserve meeting minutes revealed that, in discussing risk management factors that could influence the outlook for monetary policy, participants generally agreed that upside risks to inflation remained high, while downside risks to employment were also high and had increased since mid-2025. Most participants noted that a shift to a more neutral policy stance would help prevent a significant deterioration in labor market conditions. Many of these participants also believed that existing evidence suggested a reduced likelihood of tariffs causing persistent inflationary pressures. In contrast, some participants noted that upside risks to inflation could be deeply entrenched and argued that further cuts to policy rates, given persistently high inflation data, could be misinterpreted as a weakening commitment by policymakers to the 2% inflation target.
