As such, Fed officials expect to move more slowly on future interest rate cuts, according to December meeting minutes released Wednesday.
“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said.
“As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy.”
The meeting minutes did not name Trump, but his proposals to tax all imports and crack down on immigration could shake up the U.S. economy — if and when they happen.
The contours of Trump’s agenda on tariffs, immigration and deregulation remain blurry, clouding the path forward for the Federal Reserve, which is still hoping to see inflation fall further.
“Given the elevated uncertainty regarding specifics about the scope and timing of potential changes to trade, immigration, fiscal, and regulatory policies and their potential effects on the economy, the staff highlighted the difficulty of selecting and assessing the importance of such factors for the baseline projection and featured a number of alternative scenarios,” the minutes said.
The Federal Open Market Committee, the panel of central bank officials responsible for setting monetary policy, voted in December to reduce interest rates to a range of 4.25 to 4.5 percent.
But as inflation remains above 2 percent, the Fed’s target, central bank officials pulled back their rate cut projections in 2025 from four at the September meeting to two in December.
Traders anticipate the Fed will hold rate steady following its first meeting of the year at the end of January, according to the CME FedWatch tool, and a majority don’t expect another rate cut until June.
