Officials of the Federal Reserve In January, they agreed that they should see inflation fall more before the interest rates were further reduced, and expressed their concern about the impact of President Donald Trump’s rates to make that happen, according to the minutes of meetings released on Wednesday.
Policy makers of the Federal Open Market Committee unanimously decided during the meeting to keep their most important policy rate stable after three consecutive cuts in total a full percentage point in 2024.
When making the decision, members commented on the possible consequences of the new administration, including a chat about the rates and the impact of lower regulations and taxes. The committee noted that the current policy is “considerably less restrictive” than before the rate reductions, giving members the time to evaluate the conditions before they take extra steps.
Members said that the current policy ‘offers time to assess the evolving prospects for economic activity, the labor market and inflation, whereby the vast majority points to an even restrictive policy position. Participants indicated that, on condition that the economy worked almost maximum, they would like to see further progress on inflation before they make additional adjustments to the target range for the federal fund percentage. “
Civil servants noticed that they were about the potential for policy changes to keep inflation above the goal of the FED.
The president has already set some rates, but has threatened to expand them in recent days.
In comments for reporters, Trump said he looks at 25% tasks on cars, pharmaceutical products and semiconductors that would accelerate all year round. Although he did not go too far into details, rates would bring trade policy to a different level and further threats for prices at a time when inflation is relaxed but is still above the purpose of 2% of the FED.
FOMC members, according to the summary of the meeting, called “the effects of potential changes in trade and immigration policy, as well as strong consumer demand. Business contacts in a number of districts had indicated that companies would try to pass on to consumers higher input costs arising from from Possible rates.
They also noted that “upward risks to the inflation views. In particular, the participants quoted the possible effects of possible changes in trade and immigration policy.”
Since the meeting, most officials from the Central Bank have spoken to cautious tones about where the policy is going here. Most view the current level of rates in a position where they can take their time when evaluating how to proceed.
In addition to the general focus that have yielded and inflationed officials, Trump’s plans for tax and trade policy have added a wrinkle to the considerations.
On the other side of worries about rates and inflation, the minutes noted: “Substantic optimism about the economic outlook, partly resulting from an expectation of a relaxation of government regulations or changes in tax policy.”
Many economists expect rates that Trump is planning to worsen inflation, although FED policy makers have said that their reaction would depend on whether they are one-off increase or that they would generate more underlying inflation that would require a policy reaction.
Inflation indicators have recently been mixed, with consumer prices rising more than expected in January, but wholesale prices that indicate a softer pipelines.
FED chairman Jerome Powell has generally avoided speculation about the impact that the rates would have. However, other officials have expressed their concern and admitted that Trump’s movements can influence the policy, so that interest rates may be delayed further. Market prices are currently anticipating the next reduction in July or September.
The benchmark of the FED at night leit tempo is currently aimed between 4.25%-4.5%.