Federal Reserve policymakers agreed last month that they were likely to have concluded rate hikes but struck a cautious stance on their next move, minutes of the central bank’s December meeting showed Wednesday.
The minutes show that Fed officials expect the economy to continue to evolve in a direction that would make rate cuts appropriate next year but that these forecasts are clouded by “an annually elevated degree of uncertainty.”
The summary of economic projections released after last month’s meeting showed a median forecast of 75 basis points of cuts next year, with a range of expectations from no cuts to six quarter-point cuts.
“In their submitted projections, almost all participants indicated that, reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024,” the minutes said.
The minutes show that “several” officials said that they may have to hold their benchmark interest rate target “longer than they currently anticipated.”
In addition, Fed officials acknowledged it is possible the economy could evolve in a matter that would make additional rate increases appropriate, a possibility that financial markets have all but ruled out.
“Participants generally stressed the importance of maintaining a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the Committee’s objective,” the minutes report.
