Minutes from the Jan. 30-31 Federal Open Market Committee (FOMC) revealed the bulk of policymakers were concerned about the risks of easing monetary policy too soon, with broad uncertainty about how long interest rates should remain at the current level.
The minutes stated, “Most participants noted the risks of moving too quickly to ease the stance of policy,” while on “a couple... pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.” They also “highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained” to return inflation to the Fed’s 2% target. Fed officials “generally” wanted “greater confidence” before cutting rates. “Some participants” said there was a risk inflation could stall if the economy continued to perform strongly.
The minutes also noted upcoming decisions on when and how to stop reducing the size of the Fed’s balance sheet, with “many participants” suggesting a start to “in-depth” discussions on that subject at the March meeting.
Fed fund futures continued to reflect the greatest odds for a Fed rate cut starting in June, with three or perhaps four reductions by year-end.