Washington– Many Fed officials would like to see inflation fall further before they support additional interest rate cuts this year, especially if the labor market continues to stabilize, minutes from last month’s meeting showed.
The meeting minutes said that a “vast majority” of the 19 participants on the Fed’s interest rate-setting committee said there were signs of stabilization in the labor market, after the unemployment rate rose in late 2025. Most officials agreed that the Fed’s key interest rate was approaching a level that neither stimulates nor constrains the economy. The minutes were released on Wednesday, three weeks after the central bank minutes Meeting January 27-28.
Fed officials at that meeting Agreed to keep the key interest rate constant By about 3.6%, after reducing it three times late last year. Two officials — Fed Governors Stephen Meiran and Christopher Waller — instead voted for another quarter-point cut.
The minutes underscored the deeply divided nature of the committee, with several camps emerging: “several” officials said additional cuts were “likely to be appropriate” if inflation continued to decline. But “some” officials prefer to keep interest rates unchanged “for some time,” suggesting a longer pause. Several other officials said they could have supported language in the statement issued after the meeting that would have suggested the Fed’s next move could be either a rate cut or a hike, if inflation remained above its 2% target.
Support for signaling openness to a potential rate hike appears to be a major shift from previous meetings. Chairman Jerome Powell said after meetings last year that the idea of raising interest rates was not on the table.
Powell indicated after the January meeting that the Fed may wait a few months before cutting interest rates again. He told a news conference that the economy and employment had improved since the central bank’s previous meeting in December, and added that the Fed was “well positioned” to assess how the economy will develop in the coming months before taking any further steps.
The decision to keep interest rates unchanged represents a challenge to a barrage of demands from the Fed President Donald Trump For the Fed to cut its key interest rate to 1%, a level that few economists support. When the Fed lowers its key interest rate, it can over time lower borrowing costs for mortgages, auto loans, and business loans, although these rates are also affected by financial markets.
The “vast majority” of the 19-person panel agreed that the risks of job losses and a deteriorating labor market had diminished, which was likely the main reason they voted to keep interest rates unchanged, the minutes said. The Fed usually lowers interest rates to boost spending, growth and hiring.
Figures released last week suggest the Fed is unlikely to cut interest rates anytime soon. Inflation remains high, according to the Fed’s preferred measure, and the January jobs report showed that hiring rose last month. These trends are supported by Federal Reserve officials who claim that the economy does not need further interest rate cuts.
Consumer prices rose 2.4% in January from a year earlier, according to the government He said last weekWhich is not far from the Fed’s target of 2%.
But the Fed is focusing on a different measure of inflation, which is rising. When the latest figure is published on Friday, it is expected to have risen almost 3% from the previous year. The Fed’s preferred measure puts much less weight on housing and apartment rental costs, which have fallen considerably and are, as a result, higher than the better-known Consumer Price Index.
Also last week, the government said hiring improved in January with employers Adding 130 thousand jobsthe biggest gain in just over a year, while the unemployment rate fell to a low of 4.3%, down from 4.4%.
Federal Reserve Governor Michael Barr on Tuesday pointed to the jobs report as evidence that the labor market is “stabilizing,” while inflation remains above 2%.
“Based on current conditions and available data, it will likely be appropriate to keep interest rates steady for some time,” Barr said.
Separately, Chicago Fed President Austan Goolsbee told CNBC on Tuesday that the Fed may cut interest rates “several more times” this year, if there is evidence that inflation is approaching 2%.